16 Mar 2011 : Column 231

House of Lords

Wednesday, 16 March 2011.

3 pm

Royal Assent

3.06 pm

Airports: London

Question

3.07 pm

Asked By Lord Spicer

To ask Her Majesty's Government whether they plan to provide for sufficient capacity in the London airport system to accommodate the forecast expansion of passenger demand.

Earl Attlee: My Lords, the Government are not in the business of predict and provide. We are committed to developing a new policy framework for the whole of UK aviation which supports economic growth and addresses aviation's environmental impacts. The Department for Transport expects to publish passenger demand forecasts later this year to support the development of the framework.

Lord Spicer: If, as anticipated, Heathrow cannot take the strain, which London airport will? Perhaps I should add that I ask that Question as a former Minister for Aviation.

Earl Attlee: My Lords, the Government have set up the South East Airports Task Force to look at how we can make airports in the south-east better, but not bigger.

Lord Berkeley: My Lords, since the Government claim to be the greenest Government ever and have announced the construction of a high-speed railway line, will they also take forward their airline policy by restricting demand so that the CO2 emissions are reduced with the use of less environmentally polluting means?

Earl Attlee: My Lords, we are indeed restricting demand: we are not authorising a third runway at Heathrow Airport or anywhere else in the south-east.

Baroness Kramer: My Lords, does the Minister agree that, with five airports in London, there is adequate airline capacity? Is not the need for high-speed rail so that we can meet the needs of the domestic market, which is what is driving most aviation growth?

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Earl Attlee: The noble Baroness makes an extremely good point.

Lord Clinton-Davis: What effect, if any, do the Government estimate there will be on British aviation and employment if capacity in the London area, particularly at Heathrow, is reduced or remains as it is? What consideration, if any, have they given to these issues?

Earl Attlee: My Lords, we have given a lot of consideration to these issues. I have talked about the South East Airports Task Force; there is also a wider, long-term, more strategic study. However, we will not make any significant increase in airport capacity in the south-east.

Lord Clinton-Davis: My Lords, I forgot to declare an interest as president of the British Airline Pilots Association.

Lord Swinfen: My Lords, what proposals are there for the expansion of Manston Airport, which has a trunk road running along its southern boundary and a railway line about a mile away?

Earl Attlee: My Lords, that will be considered in the wider strategy, and no doubt the south-east airport study will look at it as well. I have to say, however, that although Manston has some attractions, it is quite a long way from London.

Baroness McIntosh of Hudnall: My Lords, I should declare an interest as a long-term supporter of the campaign to stop expansion at Stansted Airport. The Minister will therefore get great support from me for his statement that the Government are not in favour of a predict-and-provide policy. However, does he accept that the effect of long-term uncertainty about airport expansion at various points, and certainly at Stansted, has been a blight on the surrounding areas? Will he use his and the Government's best efforts to prevail on the British Airports Authority not to hang on to property that it owns in those areas, thereby making the blight worse?

Earl Attlee: My Lords, I was delighted to see the noble Baroness, Lady McIntosh, rise, because I anticipated some support from her. The property issues surrounding Stansted are a matter for BAA. She also asked about uncertainty. During my research on this Question, I could not find 1 zeptogram of a suggestion that my right honourable friend the Secretary of State was going to change the policy.

Lord Rotherwick: My Lords, in the Minister's Answer to the Question he referred to the Government bringing forward their proposals for aviation at the end of this year. Will those proposals address the needs of general aviation, and will they bring forward a framework to revise the 1982 aviation Act?

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Earl Attlee: My Lords, most of the study relates to commercial aviation, not general aviation. The noble Lord will be aware that a future airspace strategy study is under way, which will improve the planning of flights from the continent to UK airports. It will also impact on general aviation, but I hope not in a negative way.

Lord Davies of Oldham: My Lords, does the Minister hope that his watchword-that this Government do not project or provide-runs right across Government? Does it extend to other Governments? Does he think, for instance, with regard to airports, that the Dutch, French and Spanish Governments are taking the same negative approach to the question of air traffic?

Earl Attlee: My Lords, we do not take a negative approach to the aviation industry at all, but we have maxed out the capacity of the population around Heathrow Airport to tolerate further expansion. We also need to constrain aviation-related emissions.

Lord Kennedy of Southwark: My Lords, will the noble Earl take this opportunity completely to dissociate the Government from the ridiculous plans of the Mayor of London to put an airport in the Thames estuary?

Earl Attlee: My Lords, we do not support any proposed airport in Kent or the Medway.

Lord Brooke of Alverthorpe: My Lords, does the Minister agree that aviation is one of the most successful industries in this country? In the light of what he just stated, what are the Government doing to grow it, or does he propose to reduce it? Can he also explain how much is saved by forcing more and more business from Heathrow to Schiphol, Charles de Gaulle or Frankfurt? What is the saving in green terms?

Earl Attlee: My Lords, I agree with the noble Lord's first question about the importance of the aviation industry, but we do not want massively to increase the use of aviation, we want to keep it where it is. We must constrain our aviation emissions.

Lord Faulkner of Worcester: My Lords, can the Minister confirm that in all the countries that have constructed high-speed railways, the demand for domestic air transport has declined significantly? Therefore, if the Government are determined to build High Speed 2-as I very much hope they will-they are perfectly entitled to rescale down the projected demand for domestic aviation in the United Kingdom.

Earl Attlee: My Lords, the studies of aviation demand will take the noble Lord's point into consideration. I understand that domestic aviation in Spain has been drastically reduced because of the construction of a high-speed rail network.

Lord Vinson: Does the Minister agree that in view of the fact that 90 per cent of freight and passengers will always go by road, it might be sensible to finish our motorway system first, and ease the blockages and the huge amount of pollution caused by them, before we get on with any vanity high-speed rail?

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Earl Attlee: My Lords, that question is a little wide of the one on the Order Paper, but my understanding is that the strategic road network is largely complete.

NHS: Hospital Patient Maltreatment

Question

3.15 pm

Asked By Baroness Knight of Collingtree

To ask Her Majesty's Government what steps they will take to ensure prompt action when widespread maltreatment of patients in NHS hospitals is reported.

Baroness Northover: My Lords, maltreatment of patients in the NHS is totally unacceptable. The Government are determined to tackle this. Patient safety should be at the heart of everything the NHS does. The Care Quality Commission will be conducting unannounced inspections of NHS trusts. We are also seeking to strengthen accountability in the NHS and ensure that patients and their families have a stronger voice.

Baroness Knight of Collingtree: My Lords, I am most grateful to my noble friend for that Answer. Is she aware that, over the past five or six years, I have raised in this House scores of cases of patients receiving appalling treatment in our hospitals? Although every case was properly authenticated, no hospital ever took action, no wrong-doings ever stopped, no culpability was ever admitted and no apology was ever made. Will she ensure that cases raised in this House by your Lordships will be acted upon without waiting years and years for an ombudsman's report to arrive?

Baroness Northover: My Lords, I am well aware that the noble Baroness has had a remarkable record in raising these cases and she deserves enormous credit for that. Many of these patients have been very vulnerable and often voiceless. The first thing we have to do, therefore, is to ensure that the systems that are in place are working properly. The first duty falls to the individual NHS organisation to investigate such an incident and take action. It is for the Care Quality Commission to intervene where there are serious concerns, but the ombudsman, in her recent report, makes it very clear that we all have a responsibility here, and it must be our responsibility to make sure that patients are treated with care and compassion at every level of the service.

Baroness Wall of New Barnet: Does my noble friend agree that what the noble Baroness, Lady Knight, said is very worrying? The Minister said that the Care Quality Commission is making unannounced visits to hospitals. My own hospital had two visits-one to Chase Farm and one to Barnet-just last week. Fortunately, they each received a very good report. That is the only way to ensure that there are no opportunities to hide away any maltreatment that may be going on.

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Baroness Northover: I thank the noble Baroness for calling me her noble friend. She is indeed quite right that unannounced inspections should surely help, though if you read the ombudsman's reports, what is so striking is the lack of empathy for patients. Clearly, a culture change is required among those who are meting out poor care where that is the case. There is much very good care, but there is clearly a lot of poor care, and we must do everything we can at every level to try to change that.

Baroness Howarth of Breckland: My Lords, perhaps I may raise a more institutional issue about the hospital service. How many elderly and disabled people are languishing in hospital beds because there is no alternative-an alternative either in good residential care with or without nursing or in their own homes with a care package? I understand from a report I heard recently that there are hundreds of old people who could be moved on. It is when they languish in those beds that this kind of poor care develops, and I, like the noble Baroness, Lady Knight, have anecdotally heard of people who say, "Just don't get old these days".

Baroness Northover: I thank the noble Baroness for her question. It is clearly in everyone's interests, especially in this House, to make sure that older people are treated with care and consideration. One thing that comes through from the ombudsman's report is that this does not apply simply to people who are stuck in hospital, although that is greatly to be regretted and we want to ensure that that does not happen. People in the hospital setting for routine care also are not treated very well. We have to ensure that for whatever reason a person is in hospital they are treated with care and compassion.

Lord Clement-Jones: My Lords, the Minister will have been shocked, as were many of us, by the report from Ann Abraham, the health ombudsman, which reported on some very severe cases of maltreatment in the NHS. However, as the noble Baroness, Lady Knight, said, this sort of maltreatment has been going on for many years in the NHS. Is not fundamental change needed in terms of quality, standards, culture, complaints, inspection and reporting? Can the Minister explain how the new NHS reforms will address these?

Baroness Northover: I thank the noble Lord for that question. I would point out that the cases highlighted in that report occurred under the previous Administration. But I would not make a party political point here. It is something which we all have to address and we have to ensure that, as we change the NHS, we build in far better ways to ensure that the voices of patients and their families are heard.

There will be the new healthwatch organisations at the local level and the national level. Those organisations will report their concerns to the national board, which will talk to the CQC and advise the Secretary of State. We are hoping to put in place far greater accountability and there will be more local accountability. This is something which we all have to tackle. I note that the Royal College of Nursing has responded positively to this. But the Royal College of Physicians and the Royal College of Surgeons have not yet responded.

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Baroness Thornton: My Lords, the noble Baroness, Lady Knight, and I have talked about the malnourishment of elderly people. Age UK and Mencap have expressed concern about this issue. It will cost more if people who can no longer cope are taken into hospital because they do not have decent food. Will the Government monitor the results of cuts in the provision of meals to the elderly, the vulnerable and the disabled in the coming years following the cuts that local councils are having to make?

Baroness Northover: I should point out to the noble Baroness that the previous Government put in place arrangements to improve nutrition and to try to cut dehydration. That has not tackled this problem. I do not think that this is a problem of funding; I think it is a problem of culture.

Middle East: Rule of Law

Question

3.23 pm

Asked By Lord Soley

To ask Her Majesty's Government what action they are taking to promote and support the rule of law in the countries of the Middle East.

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, in the Kuwaiti Parliament on 22 February last my right honourable friend David Cameron affirmed that we stand with the people and Governments of the Middle East,

"who are on the side of justice, of the rule of law and of freedom".

As part of Britain's long-term approach to, and friendship with, the region, and drawing on UK legal expertise, this Government undertake a range of activities to assist in promoting the rule of law. This includes training and mentoring to help build the skills and capacities of judges, justice ministries, lawyers and the police, and specialist support to develop policy and unlock legislative reform.

Lord Soley: I am sure that the Government and the House will agree that the lack of rule of law and democracy and human rights in the Middle East underpins so much of the instability and conflict in the area. I know that the Minister is aware of the proposal that I made to Zayed University in Abu Dhabi with outreach into Palestine to develop the rule of law in Palestine and Abu Dhabi. We have a very special position in the United Kingdom because of our expertise and history on the rule of law. Will the Minister continue to support the proposal that is now well developed for Palestine and Abu Dhabi to link up on the first postgraduate programme including human rights and international law in the Middle East?

Lord Howell of Guildford: My Lords, I am aware, as I think the noble Lord knows, of the project to set up the postgraduate school of law at Zayed University in Abu Dhabi combining Palestinian and Abu Dhabi endeavours. We welcome that as an excellent initiative

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and my honourable friend the Under-Secretary of State, Alistair Burt, has also indicated his welcome for it and suggested ways in which we in the Foreign and Commonwealth Office can assist with the project.

Lord Hylton: Can the noble Lord confirm that this country has already assisted in setting up a system of courts in Qatar, and will they offer similar help to Bahrain and other Gulf States? Finally, would Commonwealth legal models provide suitable examples for similar systems in the Middle East?

Lord Howell of Guildford: On the final point from the noble Lord, who knows a great deal about these things, I think the answer is yes. Of course, we are active in offering legal assistance and legal training help in all those countries in the region that wish to accept it, which is most of them. In addition, we have the Arab Partnership Fund, which highlights priority areas for action, including the rule of law and anti-corruption work, throughout the Middle East and north African region. Obviously at the moment there are some problems in the way of carrying on these programmes, but wherever they are wanted and needed, we are pressing to offer them.

Baroness Falkner of Margravine: My Lords, will my noble friend agree that the rule of law must be predicated on an element of justice alongside freedom, and that most of the Middle East countries have used terrorism laws in the aftermath of 9/11 to put on their statute books some of the most repressive and catch-all legislation there is? The noble Lord, Lord Hylton, mentioned Bahrain, which has very repressive anti-terrorism laws. Are we working with these countries to help moderate their attitude towards terrorism and to provide a little more scope for peaceful dissent without dissenters being entrapped by those laws?

Lord Howell of Guildford: The short answer is yes. My noble friend is completely realistic in pointing out that there were some undesirable practices and programmes in the past. Our view is best encapsulated by a quotation from the Prime Minister when he said in Kuwait the other day:

"It is not for ... governments outside the region to pontificate about how each country meets the aspirations of its people. It is not for us to tell you how to do it, or precisely what shape your future should take",

in these countries. He continued:

"But we cannot remain silent in our belief that freedom and the rule of law are what best guarantee human progress and economic success",

in each country. That is the principle on which we proceed. Where we find obstacles, we will seek to overcome them.

Baroness Symons of Vernham Dean: My Lords, I am delighted to hear that the Prime Minister gave such enthusiastic support to an initiative that was actually begun by my noble and learned friend Lord Falconer of Thoroton when he sat on the Woolsack. Are the Government specifically encouraging the very useful work that the Law Society and the Bar Council have undertaken in a number of countries in the Middle East?

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I also agree with the points made by the noble Baroness, Lady Falkner of Margravine, that human rights lie at the heart of the rule of law. In so far as that is concerned, will the Government particularly direct their attention to encouraging the countries of the Middle East to sign up to the protocols against the death penalty and the use of torture, and the protocol for joining the International Criminal Court, as Tunisia has done since the revolution?

Lord Howell of Guildford: My Lords, the answer is yes to all those points, and certainly to the support of the Bar Council. There is also the Justice Assistance Network, a cross-governmental network that draws on UK expertise to provide coaching, mentoring and twinning support for judges, prosecutors and court staff. We are active and positive in all these areas, and we recognise the work done by both the noble Baroness and the previous Government in this area.

Lord Woolf: My Lords, I should disclose that I am the president of the court referred to by the noble Lord, Lord Hylton. In that connection, perhaps I may underline the contribution being made by many law firms in the Middle East. Does the noble Lord agree that what will happen is that those countries will look at the way we observe the rule of law in this country? In those circumstances, is it not critically important to show that we meticulously observe the rule of law and recognise the importance of the European Court of Human Rights in relation to our own situation?

Lord Howell of Guildford: The noble and learned Lord is drawing me into a major and vastly important area on which I am not going to comment today except to say that his contribution to it is of course enormous and that we recognise the value of his opinions. But the broader question of the European Court of Human Rights, how it works and its relationship to the EU as a whole and to this country, is one that no doubt we will debate in this House vigorously in the coming weeks.

Côte d'Ivoire

Question

3.30 pm

Asked By Baroness Kinnock of Holyhead

To ask Her Majesty's Government what representations they are making to the United Nations and the European Union on the situation in Côte d'Ivoire.

The Minister of State, Foreign and Commonwealth Office (Lord Howell of Guildford): My Lords, through the European Union and the United Nations, the United Kingdom offers its support for firm action on Côte d'Ivoire in the UN and the EU, and gives broad support to the work of the African Union. We supported the reinforcement of the UN peacekeeping force and continue to urge a robust interpretation of its mandate. We also supported swift action in the EU to apply strong and appropriate restrictive measures against those who support and sustain Mr Gbagbo's regime. With our EU partners, we will review and reinforce these measures as necessary.

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Baroness Kinnock of Holyhead: I thank the Minister for his detailed response. Does he agree that while the world focuses on Japan and North Africa, we must also respond to the growing humanitarian and security emergency in Côte d'Ivoire? Some 400,000 people have been displaced, and 75,000 of them have already moved into Liberia, one of the poorest countries in the world. How will the UK respond to urgent appeals for aid for Côte d'Ivoire and, indeed, for other countries in the region that are affected such as Liberia, Sierra Leone and Ghana?

Lord Howell of Guildford: The noble Baroness is entirely right. What is happening in Côte d'Ivoire raises broad concerns that affect the global community, not just this country. I have particularly in mind the horrific murder of several women who only the other day were shot down in cold blood in Abidjan. I have been asked how we support these matters. We do it chiefly through the UN and the European Union. Our own Department for International Development is monitoring the situation and provides direct help, particularly to refugees, to whom the noble Baroness specifically referred. So, frankly, our support is not mainly bilateral but through international institutions and the EU, working in support of France which tends to take the lead in these matters. However, the situation is a worry for all those concerned with civil rights and the promotion of peace and stability in Africa. What is happening at the moment is extremely worrying.

Lord Steel of Aikwood: I hope my noble friend understands that I am not advocating that we send a gunboat, given that we have very few gunboats left to send. However, will he consider the successful operation in Sierra Leone a few years ago? Given the support that, importantly, the African Union has given to Mr Ouattara's successful election, what practical help can the Government offer to try to get rid of the deposed president?

Lord Howell of Guildford: When it comes to detailed help, particularly if force is involved, ECOWAS is the organisation that is bound to take the lead. In principle we support the proposals made by ECOWAS, but we think that the authority of the United Nations is needed before they are taken forward. If there is to be that kind of pressure backing up the views of the African Union High Level Panel, of which I am afraid Mr Gbagbo took not the slightest notice, any such firm intervention should be made through the ECOWAS system.

Lord Hughes of Woodside: My Lords, given that the focus so far has been on mediation between the two parties in Côte d'Ivoire, is it not now time to abandon that since it is clearly not working? Any attempt to broker an agreement between the two candidates, one of whom failed to be elected and one of whom succeeded, is simply futile and fuels the problem?

Lord Howell of Guildford: I think it has been right to try mediation and talk, but the noble Lord may be pointing in the direction in which things develop. Mr Gbagbo has flatly rejected any attempt at compromise and his troops continue to commit violent acts in Abidjan, as I described a moment ago. The lawfully

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elected president, Mr Ouattara, remains unable to take over his lawful position. Things may go that way, but in the African Union and ECOWAS there is a great wish to see whether it can be done without bloodshed first.

Lord Fraser of Carmyllie: My Lords, some considerable time ago, I was invited by the trading company Trafigura to conduct an independent inquiry into the alleged dumping of slops in Côte d'Ivoire by it. That followed an invitation to which I responded positively to conduct an inquiry led and asked for by the Labour Administration in the Scottish Executive into the cost overrun of the Scottish Parliament. I am delighted to say that a Labour Lord Chancellor had the generosity of spirit to say to me that that was exactly the way to write a report. Subsequent to that, not a single member of the deposed president's Cabinet responded to me. They were clearly gagged. It seems to me that I was getting dangerously close to the truth that there was widespread corruption in that Administration, and that is why they do not wish to relinquish office. Do I take it from my noble friend's previous answers that he is telling me that I should just stay silent until democracy is restored to that benighted country?

Lord Howell of Guildford: Perish the thought that I should ask my noble and learned friend to stay silent on these matters. His experience and his skill and expertise in this area and many others in the legal and other fields are very considerable, as we all recognise. He describes an interesting bit of history. Indeed, modern developments confirm that in the matter of Mr Gbagbo we are dealing with a very unsavoury character who is clinging on to power illegally and no doubt using extremely dubious means to do so. That is recognised by the African Union, the United Nations and, certainly, by Her Majesty's Government.

Postal Services Bill

Committee (3rd Day)

Relevant document: 9th Report from the Delegated Powers Committee.

3.37 pm

Clause 3 : Employee share scheme

Amendment 18

Moved by Lord Tunnicliffe

18: Clause 3, page 2, line 23, leave out from "reduced" to end of line 33 and insert "from 100%, the proportion of the company owned by or on behalf of the employee share scheme shall be at least 20% of the proportion of the company that is not owned by the Crown.

( ) The arrangements must ensure that an equal dividend is paid from earnings to all participants in the trust."

Lord Tunnicliffe: My Lords, we welcome the principle contained in this Bill which earmarks some of the shares for employees in the event that Royal Mail is sold. Introducing the Second Reading of the Bill, the Minister said:

"A commitment to employee shares was not a feature of the previous Postal Services Bill but it is an important addition to this legislation. I am pleased that it has support from all sides of the House".-[Official Report, 16/2/11; col. 776.]

I am advised that during the debate on the 2009 Bill-I say I am advised because, although I sat through the many hours of the debate, it is now but a fading memory-we accepted representations from noble Lords, including the noble Lord, Lord Hunt of Wirral, to make provision for employee shares within the plans contained in that Bill. Of course, under the 2009 Bill, the Royal Mail would have been in public ownership, so when we said we would allow for employee shares, we were able to do so without a specific clause in the Bill at that time. Since we are all in favour of employee shareholdings in Royal Mail in principle, let me now turn to the amendment.

The benefits of employee share schemes have been widely recognised. They can include motivating employees to become more productive, helping to align the employees' interests with those of shareholders, remunerating employees in a tax-efficient way, increasing loyalty and reducing staff turnover. Of course, employee share schemes cannot do all that on their own; they have to be part of a wider approach to good industrial

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relations. Employee shares will not be welcome if they are felt to be a sop, to come at the expense of pay or to be a substitute for the usual channels of interaction among management, unions and staff.

The government position is that at least 10 per cent of the shares of Royal Mail should be put into an employee share scheme. That is why our amendment proposes that 20 per cent of the company be made available for such a scheme. We know that any privatisation of Royal Mail will inevitably entail a lot of change and upheaval. Its success will rely heavily on the good will of the workforce and on improved industrial relations-and on those relations remaining improved. It would therefore be appropriate to give a greater proportion of the company's shares to the workforce. Since this Bill is designed to achieve complete privatisation, with the Government having no direct say after the date of transfer, it is important to pin down in legislation how things are going to work. We accept the principle of employee shares, but employees need to know a lot more about exactly how the scheme would work.

First, we would like to clarify things by our suggestion that the proportion should be larger than 10 per cent. I will listen with interest to the proposal from my noble friend Lord Clarke about 25 per cent and to the Minister's response to that-there may be complexities about 25 per cent that we will have to consider. However, we certainly urge the Government to provide for a 20 per cent share. We need to understand whether employees would really have to wait until the last Crown share is sold before being able to apply for any employee shares. We need to know what mechanism is going to be there to prevent shares going to employees one day and being sold within a year or two. If the purpose were to have employees feeling that they have a stake in the company, what long-term purpose would be served by passing shares swiftly through the hands of employees and back out to private institutions or hedge funds, even if the employees make a casual profit from the transactions?

We need to be clear that shares would be held on an equal basis with equal voting rights for each shareholder and an equal distribution of dividend. Would some shareholders be more equal than others? Will employees be able to act cohesively to influence the strategic direction of the company to some extent, albeit from a minority position? We would like to have greater certainty about eligibility criteria: who would be entitled to shares or share options and what would it mean in practice? Last, but not least, what proportion of costs would be borne by whom?

There is still much we would like to know about the scheme. Over the past 20 years in the industrialised world, there has been a significant increase in the proportion of employees who own shares in their own firms. This has happened in the UK, other European Union countries and the USA. By 2004, one-fifth of British workplaces had share ownership schemes, covering one-third of all private sector employees, encouraged by tax allowances. In evidence to the Public Bill Committee in another place, Carole Leslie, policy director of the Employee Ownership Association, said:

"I am a bit disappointed at 10%, because 10% to me is small, which means that you have to put more effort into giving employees that real voice in the company so that they do feel that it is

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theirs-they do feel that that ownership, if you like, is real and it is not a token".-[Official Report, Commons, Postal Services Bill Committee, 09/11/10; col. 71.]

George Thomson, general secretary of the National Federation of SubPostmasters, said to the same committee that,

"if Royal Mail Group is privatised, I think there is a case for the postmen and the staff to own 20% of Royal Mail Group; for that to be mutualised as a concept so you do not sell your shares when you leave the company but leave them behind; and for the CWU to be on the board of the new Royal Mail Group. So I see it not just for Post Office Ltd. I see it as let's do it right within Royal Mail Group. If it is going to be privatised to bring in private capital, there is a case for making it 20% of the shares, which are not sold on".-[Official Report, Commons, Postal Services Bill Committee, 09/11/10; col. 29.]

An employee share scheme can take many different forms. We believe that it is best if we look at the possibilities now rather than leave it until the Bill becomes an Act, while there is time to design a scheme that will work best for Royal Mail.

The Bill implies some form of trust. However, it is unclear whether these shares would be held in trust, with a percentage of the dividend being paid out annually to each employee, or whether there would be a pot of shares to be handed out to individual employees as shareholders. If there is an offer of shares to employees of Royal Mail, how will this be made most attractive to employees? Will there be an offering along the lines of two or three for the price of one? Perhaps there should be multiple pots of shares for employee benefits, with one pot in the form of a share incentive programme or save-as-you-earn scheme to take advantage of the tax incentives. A further pot of shares could be set up for training, bursaries and so on, which could be held in trust. These rewards could also be linked to transformational targets.

It goes without saying that any structure proposed for the future Royal Mail must be stable, if it is to be genuinely for the good of its customers and its employees. Any change in the status of the ownership of Royal Mail should provide an ideal opportunity for setting up a scheme. I beg to move.

Lord Cotter: My Lords, in one sense I welcome the amendment. Speaking for these Benches and, I think, for the Government as well, I think there is no harm in the Postal Services Bill emphasising the importance of shared ownership. The issue has already been rehearsed, but I welcome the fact that it is being raised again. However, it is not necessary to say that 20 per cent or 25 per cent share ownership should be required. We on these Benches, and I think the Government as a whole, are determined to ensure that as many shares as possible are distributed.

Another issue that I feel strongly about, which I am glad is being rehearsed again-and on which I am sure the Minister will respond, as she has done previously-is that share ownership and the input of the employees into postal services are very important. I know that the Minister has accepted that already, and we on these Benches also think that it is very important.

There is no harm in having a discussion on these issues, but being specific about more than 10 per cent could be counterproductive. Much as we would hope that share ownership will be quite high, we want to

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ensure that a purchaser feels able to have a level of control of the company that the purchaser considers sufficient and appropriate. I would urge the Government to provide as many shares as possible for the postal services employees. In that sense I welcome the amendment, but we should not be prescriptive beyond the 10 per cent that we have said already. I look forward to the Minister's response on the various questions when the time comes.

Lord Clarke of Hampstead: My Lords, I declare my usual interest as a former postman. As all Members of this House will know, I am bitterly opposed to the whole idea of selling off Royal Mail in part or whole. I have a dream; I live in hope that the Deputy Prime Minister will wake up one day, have a fit of conscience and resign from the Government, the coalition will fall and we will not have the Bill at all. However, being a realist, I suppose I have to accept that we have got past that stage and we now have to look at share ownership and the protection of employee shareholders. That is my interest.

If the Bill is to proceed, the shares have to be subject to a reasonable code of conduct that does not permit what happened to some members of my union when BT was privatised. I will come back to the vast quantities of shares and share options that were given to the people at the top of BT.

Issuing shares could be a beneficial move-notwithstanding my reservations about the whole thing-but it could have unintended consequences. Workers at Royal Mail will want to know that their shares are not allocated at the expense of their pay and conditions. Receiving shares does not constitute much of a choice if you cannot get a reasonable cost of living increase when circumstances allow. Employees will want to know that their shares will not cut across their other chosen and established means of engagement within the company. They will also want to know that the company is being put on a sound footing for the future. That depends on the regulatory and other frameworks that this Bill and the Government set for Royal Mail in the future. Employee shares would hold little attraction if they turned out to be merely an anvil around the neck of employees as the ship sinks slowly under the water. I hope that during these debates we will receive genuine assurances on these points.

In speaking in favour of Amendment 18, I put my noble friend's mind at rest in that he will not hear me waxing on about the 25 per cent figure as I do not intend to move the relevant amendment. I will try very hard to convince the Committee that 20 per cent is the right figure. I support most of the points made by my noble friend who moved Amendment 18.

First, if there are to be employee shares, I support the case for employee shareholdings to be held in trust. That is very important. I hope that the Government will not dogmatically reject that idea. If the pattern of the past is followed, employee shares will disappear like ice in a Turkish bath-they will go. They will no longer be owned by employees but will be available on the market for people to buy up. If you have your basic pay and some shares and you are under pressure to pay a domestic bill, you are tempted to dispose of the shares. If that happens, I believe that they should be

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disposed of back into the employee shareholding trust. I hope that the Government will take that matter into account.

Secondly, I agree that it is quite wrong for the Bill to propose issuing the first employee share only when every single Crown share has been disposed of. That would be unfair and illogical. I understand that 10 per cent is not the maximum proportion of employee shares that have been permitted in a privatisation. A whole string of bus companies were sold 100 per cent to employees. I do not suggest that the 100 per cent figure should apply in this case, but why restrict it to 10 per cent? I believe that the noble Lord, Lord Cotter, talked about the widest possible issuing of shares to staff, or allowing them to purchase them. That is very important. Unfortunately, most of the companies to which I have referred went the same way as the other privatisations, with 10 per cent or fewer employee shares, and they tended to dwindle away over time. What is the case for a bigger share? I do not pretend to be an expert on anything, but we should listen to people such as Carole Leslie, policy director at the Employee Ownership Association, who told the Public Bill Committee in the other place:

"I am a bit disappointed at 10%, because 10% to me is small, which means that you have to put more effort into giving employees that real voice in the company".-[Official Report, Commons, Postal Services Bill Committee, 9/11/2010; col. 71.]

We have not yet dealt with the representation of employee shareholders, although I am sure we will do so later in our consideration of the Bill.

The general secretary of the National Federation of Sub-Postmasters told the same committee that if Royal Mail Group was privatised, there was a case for its employees to own 20 per cent of the group. That assertion supports the amendment of my noble friend.

Peter Stocks, managing director of the Baxi Partnership, which grew out of a manufacturing company and now advises on employee ownership, also gave evidence to the same Committee. He stated:

"I think that 10% is quite low and I think that there is a danger that if it is just shares and there isn't a participation culture that goes with it, it won't change a lot. We see real results in companies where the whole of the company feel that they have a sense of ownership. They feel that they participate in decisions. They discuss decisions and when they make a decision they stick with it. It was interesting watching some of our members through the recession. Employee-owned companies are affected the same as everybody else. They would have gone through an awful lot of agony about how you manage through different times but, because those decisions were made in a very participative way"-

by staff and management looking at the issue together-

"once the decisions were made they were stuck to, and bought into, by everybody. Our members have gone through the recession in a very resilient way and I think that is down to the way you manage the company".-[Official Report, Commons, Postal Services Bill Committee, 9/11/10; cols. 71-72.]

Let us hope that when the Government get their way with the sale there will be a company with a similar philosophy on these issues.

The staff of Royal Mail-who are mainly postmen and postwomen, but there are many others also-are dedicated people. That has been proved throughout its 350-year history. If those who remain, following the loss of 60,000 jobs in the past couple of years, are to

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experience the anxiety of a traumatic change of ownership of their company-I cannot get my mind around "company", because the Post Office is the Post Office and Royal Mail is Royal Mail-and if they are to be invited to take a shareholding in their company, it should be done in a way that is fair and reasonable to them and that gives them the prospect of a real say in the success of their company.

Immediate employment is not the only issue at stake for Royal Mail staff; they also need a final guarantee that they will be able to pay their rent or mortgage. They have a big stake. Working for Royal Mail is the means whereby their children can be educated and have better prospects in life, and they use their hard-earned income for a better life. As I said on Monday, postal workers may not always see eye to eye with management, but they are always acutely aware that a viable and successful Royal Mail is in their own interests.

Employee shareholdings have been encouraged by tax allowances; £900 million a year is spent on tax relief for employee share schemes, according to the Employee Ownership Association. However, 50 per cent of that tax relief is on discretionary rather than all-employee schemes. Therefore, 50 per cent of the tax relief is going to 3 per cent of employee shareholders. The EOA says that this is poorly directed tax relief. I should add that it is grossly unfair.

When British Telecom was sold, and it was promised that a golden share would be retained by the Government, those at the top of BT held thousands of share options, although I do not know the exact figure. Any examination of BT's annual accounts will show how many share options were given to them.

We should be very careful how we treat this exercise, and there is a good case for equality. A 20 per cent shareholding should be distributed on an equal basis to all employees. This would turn the Government's plan from a progressive proposal to a truly radical one. It would give employees a real sense that they had a say in the direction of the company and a stake in its success. It would stand a better chance of realising the worthy aspirations that Ministers have expressed in stating the case for employee shares. I look forward to hearing the Minister's reply. In the mean time, I support the amendment.

4 pm

Baroness Kramer: My Lords, I will make a couple of comments. I very much support the employee ownership proposed in this Bill, which is a great improvement on the Bill that did not complete its progress through the previous Parliament, because it includes employee ownership and because the amount of ownership proposed is very substantial. The Government have more details on that than I do. For people working in Royal Mail, there are two issues of great concern. One is that they should be part-owners in a way that this share ownership will allow them to be, in order both to have a voice and to benefit from the profits that will flow from their efforts and from the future success of the company. It is also very important that there should be the maximum possible investment in the future of Royal Mail. Those two issues have to be balanced.

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By expanding the number of shares that will be distributed to employees, the ownership potential for a private partner is reduced, which will reduce his, her or their willingness to put additional money into Royal Mail. I caution that there is a balance to be achieved here. Ten per cent is enough to provide a real voice and real reward, but potentially up to 90 per cent going out in some form to the private market is a real guarantee that the purchaser, whoever they are, will have to put in serious and large investment to make sure that this the company is very successful in future. That is surely what employees want, too.

The noble Lords, Lord Clarke and Lord Tunnicliffe, raised many issues that underscored the complexities of trying to set up share ownership for employees in an effective way. The more I heard about all those complexities, such as how shares should be distributed between employees, the more it struck me that the Bill is not the place to set up a structure such as that. It is good to have a discussion in this House, but with so many tax and legal issues there is a need for consultation and much greater involvement by many parties, including potential private partners as well as employees. We would be trying to make the Bill do too much by accepting these amendments, as well as some of those that we will debate later.

Lord De Mauley: My Lords, I thank the noble Lords, Lord Tunnicliffe and Lord Clarke, for tabling their amendments, and also thank my noble friends for their contributions. I should perhaps declare an interest; my wife owns and jointly runs a web-based mail order company that uses Royal Mail to deliver its products.

I am delighted that the noble Lords, Lord Tunnicliffe and Lord Clarke, agree with the Government about the attractions of the establishment of an employee share scheme. I say that in the most welcoming and genuine sense. We all agree that this key feature of the Bill will help to improve employee engagement and the culture of the company. We should not lose sight of the fact that the overriding purpose of the Bill is to safeguard the universal service and to secure the future of Royal Mail. A key means of doing that will be by introducing private capital. In deciding on the size of the stake that should go to employees, as my noble friend Lady Kramer said, the Government have had to balance giving a meaningful stake to employees with the imperative of ensuring the private sector investment that the company needs. This is a matter of judgment.

I will put in context the commitment that we are making through Clause 3. The minimum 10 per cent share requirement in the Bill is the largest statutory employee share scheme of any major privatisation. The share is unprecedented, and there is no doubt that it is meaningful. Most major privatisations did not even refer to employee shares in their respective Bills. Furthermore, the share schemes that eventuated offered smaller stakes: 5 per cent in the case of BT and British Gas, and less than that for the other utilities of electricity and water. Only Rolls Royce and BA came close, at 10 per cent and 9.5 per cent respectively. However, we are committed to at least 10 per cent.

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I share with my noble friend Lady Kramer experience of advising companies in similar situations. I did that for nearly 20 years, and my experience convinced me that a requirement that employees should own at least 20 per cent, or even 25 per cent, of the shares in the company, as the amendments suggest, would jeopardise getting the investment that the company needs simply by virtue of the substantial size of that stake. We therefore unfortunately cannot accept the increases to the size of the employee share scheme proposed by these amendments. I hope that noble Lords will accept that what is offered is offered in good faith, and that to commit to more would prejudice our ability to achieve a sale.

The requirement to pay equal dividends to all participants of the scheme certainly has attractions. However, Clause 3 is designed to maintain as much flexibility as possible to design the right scheme. We would be ill advised to set in stone the form of an employee share scheme until we have more certainty on the form of the private sector investment. Furthermore, there are other equally sensible methods for determining the allocation of shares and therefore dividend payments. An example of another equally sensible method is length of service, for example. I therefore urge noble Lords not to restrict options at this stage.

The noble Lords, Lord Tunnicliffe and Lord Clarke, asked about the specific route to be followed. The noble Lord, Lord Tunnicliffe, helpfully compared, for example, share trusts against individual ownership. This subject will come up again in subsequent debates on amendments. In brief, some of the benefits of share trusts are that they can be structured to last indefinitely. Depending on their design, they would always keep the capital value of the shares within the trust. Against that, this may not be the appropriate form of scheme to motivate individuals, and we will assess the merits of a share trust and other designs at the appropriate time. Individual ownership clearly offers individuals the opportunity to build up a share pot while they are employed in the business, which they can benefit from when they retire or move on. Individual shares can also be better for employees, in that they offer a greater sense of ownership and can be more tax efficient. The noble Lord, Lord Tunnicliffe, suggested other options, which I found very helpful. This emphasises why it is important at this stage that we keep our options open.

The noble Lord, Lord Tunnicliffe, specifically pointed out some risks of going down the route of issuing shares to employees. As I have said, the exact form of the scheme is still being developed and will be likely to be dependent on the form of the private sector investment. If the share scheme allows for individual ownership of shares by employees, we will obviously explore the most appropriate way of encouraging employees to keep their shares for the long term. Many of the tax efficiencies associated with those schemes relate to a certain holding period, which could be incorporated into the scheme rules. Noble Lords should not assume that employees will automatically sell their shares. In its written evidence to the other place, ifs ProShare noted that two-thirds of BT employees retained their shares rather than selling them off.

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The noble Lord, Lord Tunnicliffe, was concerned that there is no guarantee in the Bill that employees will get any shares until the Government have sold their entire holding. Employee shares are an integral part of our policy for Royal Mail, and we have committed to ensuring that there are shares within the scheme at the same time as private capital is introduced. This is the strongest legislative commitment of any major privatisation. The exact sequence of events in such a large and complex sale is difficult to predict at this stage. This means that we need to maintain a degree of flexibility about precisely when during the process the scheme is set up, so as not to complicate that process even further.

The noble Lord, Lord Tunnicliffe, quoted Employee Ownership Association evidence to the Commons Public Bill Committee, saying that 10 per cent was not enough. I might give another quote from evidence to that committee. Alexy Armitage of ifs ProShare said:

"Although they might not hold as much as 10 per cent, or more than that, they like the fact that they own shares in their company and they see that as a benefit and a worthwhile thing to do".-[Official Report, Commons, Postal Services Bill Committee; 9/11/10; col. 71.]

That is at all levels, not just executives; it goes right through those organisations.

The noble Lord, Lord Clarke, was concerned about how to ensure that management does not get all the shares. I think that was the nub of his concern. He makes a very important point. As I have said, it is too early to get into the specifics, but we imagine that management will be able to benefit from the share scheme as well as other employees. However, the point is to incentivise employees and to give most of the shares to management would simply destroy that purpose; that is absolutely not the intent.

The future ownership of Royal Mail, by both private investors and its employees, will be inextricably linked. Within the important boundaries set by Clause 3, the exact size and form of the scheme will, therefore, be informed by the type and detail of the transaction. It is very important that we keep our options open, for the reasons mentioned by the noble Lord, Lord Tunnicliffe, among other things. I assure noble Lords who have taken part in this debate that their suggestions will be taken into account. I, therefore, ask the noble Lord to withdraw the amendment.

Lord Tunnicliffe: My Lords, I thank all those who have taken part in this important debate and the noble Lord, Lord Cotter, for his general support. I hope that his influence will be, as I think I heard him say, that as many shares as possible go to employees. I accept that this debate is about balance and we are obviously putting our finger on a particular balance. I certainly hope that the eventual situation is closer to our position than the minimum.

I thank my noble friend Lord Clarke of Hampstead for his contribution. I hope that the Government will look back at previous privatisations because they have not been universally successful in properly engaging employees through share ownership schemes. His other point, which supplements my own point, is important: that this must not be seen as in place of a proper

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relationship between employees, trade unions and the new company but must complement it and make the whole relationship stronger and more meaningful. He referred to the trust solution, and the closer we are to a trust solution than an individual-ownership solution the more comfortable we would be. We hope that the Government are thinking in that way.

The noble Baroness, Lady Kramer, said that this was a great improvement on the previous Government's contribution. I am sorry that the noble Lord, Lord Hunt of Wirral, is not here to assure me that my recollection and research are correct, but my understanding of our debate is that we took the point on employee share ownership but because our Bill did not have a 100 per cent sale, it left within our discretion an ability to award shares-fairly late in the Bill we were persuaded of that situation-and therefore our advice was that we could bring that forward without the need for a specific clause.

The noble Baroness made the point that there must be a balance between the new owners and the employees, which I take on board-I think it is the same point as the Minister made. However, she said that it would be wrong to introduce too much complexity into the Bill. My reading of the situation is that this will be quite a lengthy process, and we are seeking as much clarity as possible in this area, because we want to create confidence in the workforce. The more that can be done to create that confidence, the better the outcome.

4.15 pm

I welcome the Minister's general agreement with the direction. We seem to be at one on this. He made the point about it being a sufficient proportion to attract private capital. I recognise the weight of his argument but we take a different judgment in this amendment: that 80 per cent is sufficient. It is interesting that he mentioned as the two largest cases Rolls-Royce and British Airways. I should declare an interest in claiming that BA was a success, as I spent 20 years of my life preparing it. I was not there when it happened but still, never mind-you cannot win them all. Rolls-Royce is probably one of the most brilliantly successful companies in the world and it had one of the largest, so I hope that this will come out at more than 10 per cent in the end.

Finally, I sincerely thank the Minister for and congratulate him on his response to our specific questions. Having been, in the memorable and not too distant past, in his position and trying to summon up bits of paper from the Box, I admire his performance but recognise the limitations of such a situation. We asked a number of specific questions. I would be grateful if he could reflect on those in Hansard, just as we will reflect on his response, to see whether it would be sensible to write a fairly comprehensive letter for the record on this whole issue-since we are about to come on to another couple of its areas-of how far the Government are able to go in creating the atmosphere for employees to feel confident about this as we go through the Bill.

Lord De Mauley: If it helps the noble Lord, I can say that that is a helpful suggestion.

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Lord Tunnicliffe: Thank you very much. With that response, I beg leave to withdraw.

Amendment 18 withdrawn.

Amendment 19 not moved.

Amendment 20

Moved by Lord Tunnicliffe

20: Clause 3, page 2, line 29, at end insert-

"( ) Any employee share scheme will be entitled to have at least one representative from the scheme on the board of any company operating the scheme."

Lord Tunnicliffe: My Lords, we have just debated the merits of having an employee share scheme, for which there seemed to be general support on all sides of the Committee. We previously debated the merits of there being an employee representative directly appointed to the board of Royal Mail. That, too, garnered some support around your Lordships' House-I particularly recall the powerful speech by the noble Lord, Lord Cotter. However, despite warm words for the principle by the Minister, on that occasion at least, she refused to incorporate any provision in the Bill on this matter.

The amendment proposes that the employee share scheme should be entitled,

"to have at least one representative from the scheme on the board of any company operating the scheme".

That person might be an employee or an agent or expert or other representative chosen by the employee share scheme to represent its interests appropriately on the board of Royal Mail. As we have heard, one of the main purposes of an employee share scheme is to secure a greater identification and involvement of the workforce with the company. Given that the employee share scheme, most probably constituted under a trust deed, is the embodiment of this, it would seem a very sensible proposition to cement the relationship by affording the trust representation at the highest level of decision making in the company.

Postal workers already have a major stake in the company, as their livelihoods depend upon its viability. They are what my noble friend Lord Myners called "high-conviction" stakeholders-the sort of people who should make up the shareholder representation on the board-because, as well as being employees of the company, they have a cash stake in its success. I understand that where these schemes have worked successfully, an example being a Norwegian airline, employees go around switching lights off in offices and storerooms where they are not needed. That is the sort of personal involvement we would want to see.

Employee shareholders with a minimum of 10 per cent shares in what would be one of the country's major private companies-a privatised Royal Mail-should be encouraged to take part in the work of the board of the Royal Mail. Postal workers have over many decades secured comprehensive negotiating rights on matters of national and local significance. This has meant that people in the workforce have some influence over their own working lives. They have made the workplace a better, safer, more amenable and rewarding place. Royal Mail management, for its part, fully accepts that the workforce has a say in workplace

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relationships. Sometimes there are conflicts but in most cases these are resolved by the usual pattern of industrial relations that has been established in the industry. The modernisation agreement in March last year has improved relations and allowed the company to go forward positively.

If there is to be an employee share scheme-and undoubtedly there will be one with the enthusiasm for it in all parts of the House-it is only right that it should be introduced with employee involvement and an employee voice. Placing a member on the board to represent the employee share scheme would be a benefit to both the workforce and the employer. Of course, one representative on the board would not be able to outvote the rest of the board, but that representative could ensure that he represents the viewpoint of the employee share scheme and the employees when a decision is debated and voted on in the new company. The workforce would see that there was someone who reflected the experiences and concerns at the highest level and the employer could have an immediate expression of the wider, long-term concerns of the workforce. I beg to move.

Baroness Turner of Camden: I support the amendment, which is rather similar to something that I put forward in a previous sitting in Committee. I got the impression then that there was general agreement on all sides of the House that staff representation is a good thing that everyone could support. Everybody seems to agree that the involvement and commitment of the staff are very necessary, indeed essential, for the new company to make progress and for the future of Royal Mail. For that reason, it is necessary to state clearly in the Bill that staff representation is essential. Indeed, rather than just "at least one representative", I would suggest that it will probably be necessary to have more than one representative, but staff representation will certainly be necessary for the success of the scheme and of the company. Therefore, I hope very much that the general agreement around this idea commends it to the Government. If they do not accept this wording, I hope that they will accept something very similar before the Bill leaves this House.

Viscount Eccles: My Lords, I do not think that any of us could possibly disagree with the thinking behind the remarks of the noble Lord, Lord Tunnicliffe, and the noble Baroness, Lady Turner. However, I am back with my noble friend Lady Kramer in questioning whether it would be sensible to include such a provision in the Bill. The problem is that we are faced with an enormous quantum of uncertainty about what will happen to Royal Mail and the Post Office when the Bill is enacted. If we were to accept the amendment, we would be piling one uncertainty on top of another. There may well be a share scheme and an entirely separate agreement between the board and the principal shareholder-which is quite likely to be the outcome-as to what the representation on the board should be. That might indeed include employees. Whether they should be people who are also on a trust holding shares on behalf of the employees, if such a trust were formed, is a matter for speculation. While nobody can quarrel with some of the thinking behind this amendment,

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and indeed some other amendments, it is very difficult to believe that it would be sensible at this stage to put the matter on the face of the Bill.

Baroness Donaghy: My Lords, I was pleased to see the role that ACAS played in helping the company and the union come together to draw up the modernisation agreement in March 2010. That was a culmination of many years' work and has received praise from the chief executive of Royal Mail, Moya Greene, as well as from Richard Hooper, Ministers, the Opposition and the trade union involved.

Making Royal Mail into a private company is bound to cause anxiety and create disruption for employees and management alike. In those circumstances, measures to improve the atmosphere of co-operation and cohesion are to be welcomed. The proposal for employee shares, if gone about in the right way, could help that process. Assurance on the issue of pension rights, continuity of employment and recognition rights would also be helpful. The proposal for employee shareholders to have representation on the company board is interesting and enlightened. I hope that the Government will consider it seriously.

Deutsche Post has been held up as a shining example of a postal service company. Richard Hooper showered the company with praise for its modern attitude, heavy investment in up-to-date technology and overall efficiency. I readily acknowledge that Deutsche Post, although 20 per cent of the company is owned by a state-owned bank, has been passed from public ownership to private control, but it has a statutory duty to maintain a certain number of post offices. My point is that Deutsche Post has not one, two or three but 10 employee representatives on its supervisory board. If it is good enough for Deutsche Post-a shining example of a modern, go-getting privatised post operator-and for Post Danmark and many other European companies, to have employee representation on the board, why would it be so bad to cater for employee representation on the board in the Government's plans to privatise Royal Mail?

The noble Baroness, Lady Kramer-in a debate on a previous amendment-and the noble Viscount, Lord Eccles, questioned the need to include so much in the Bill. Building trust is an important element in this process. Positive statements from the Government at this stage would give an indication of their intent. Keeping all options open, as has been urged from the government Benches, will not give the reassurance required. I very much support Amendment 20.

Baroness Wall of New Barnet: I, too, support the amendment. In my experience, where employees have a stake in the business-such as being shareholders-the greater the influence they have in that business, the bigger the responsibility they take. It is a win-win situation. The presence of employees on the board means that they react differently. The evidence from when that has happened where I have been involved as a trade union official is that their ownership of the business and its success has been reinforced. The whole workforce engages in the business as a result of that recognition.

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Baroness Kramer: This discussion is expressing general agreement, as the noble Viscount, Lord Eccles, said, that it would be advantageous to have employees represented. I think that the noble Baroness, Lady Donaghy, hit the problem on the head. I am sure that she states accurately that Deutsche Post employees are on the advisory board. Under a European structure, that is exactly where you want them because that board influences policy, but it is not the board that we would recognise under British law. There are so many complexities that I do not know how we could possibly write an appropriate clause that could sit in this Bill and yet work under the six or eight potential structures and options that may arise. Therefore, although this discussion may be crucial for expressing the intention of this House, and, hopefully, of the Government, I cannot see any way that we could encode it so that it would make any sense on the face of the Bill. That is one of the problems we face when we start getting into so much detail.

4.30 pm

Lord Clarke of Hampstead: My Lords, when the Government consider the arguments we have heard about what should or should not be on the face of the Bill, will they take time to look back in history at the industrial democracy experiment that put Post Office workers-it was the Post Office then and not just Royal Mail-on local, regional and national boards? Representatives, for instance from London as in my own experience, were a conduit in decision making on very important issues like modification or improvement of services and the early days of mechanisation. That gave comfort to people. At regional level the situation was even better, but at national level not only were there two representatives-I will not name them now-on the board, but they were accountable to the rest of the workforce. The point I am making is that those people gave their time as board members-and they included women-without any share ownership. They were pleased to be part of the decision making and the understanding of why certain decisions had to be made. This was introduced in 1975, and that is why I am advising my friends on the other side to look at the history. It was only a matter of weeks after the change of Government in 1979 that the then Prime Minister-the noble Baroness who is a member of this House-decided that the scheme should be abandoned. We got the feeling then that boards were not the place for working people. I think what we have heard today shows that there are places for working people on boards.

I understand the complexities about putting things on the face of the Bill, but I believe it could be done and any prospective owner would welcome the chance of getting people in the position where they could be that vital link between the people doing the work and those who get the profit at the end of it.

Lord Brooke of Alverthorpe: I understand why the noble Viscount, Lord Eccles, should be concerned about the uncertainty, but the one thing we know is that whoever buys this company will know perfectly well-it will be on the face of the Bill-that 10 per cent of the shares will be owned by the employees. That is definite, and similarly-I will be speaking later

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in subsequent amendments about how this might be handled-if a trust fund is established, the most appropriate way in which that would be contained within the new structure of the company would be to put an employee representing the trust directly on the board.

I see no great difficulty in drafting words to that effect, which should be considered in the light of previous experience. When we dealt with the campaign against NATS being formed back in 2001-I will also speak about that later-it would have been highly advantageous and beneficial had there been more on the face of the Bill than proved to be the case at that time. I am sure that would have convinced many of the employees about what was going to happen and the way things would go.

The success or failure of this venture, whoever buys it, is going to depend primarily on the employees' contribution to the way the company will operate-and, yes, on capital too. That means that the new owners will have to manage the company in a way that, up to the last two years, we have not seen for a good many years within the Royal Mail. They will know broadly what they are taking on board, and I am sure that they would be very anxious to motivate and involve the employees as far as they can. Therefore, I do not see any great problem in finding a form of words to ensure that we have at least one representative.

Times are a-changing and I am surprised that there is a lack of radical approach, particularly from my noble friends on the Lib Dem Benches, on these issues. We have a recently commissioned report from my noble friend Lord Davies of Abersoch about the desperate need for more women non-executive directors on boards. There is also a desperate need to have the workforce better represented in many companies than we currently have, particularly people who are low paid by comparison with those on the board with substantial incomes accruing from companies. These changes will come as night follows day, so I hope that the Government will be bold and will be prepared to look at this proposal very favourably.

Baroness Howe of Idlicote: Having listened to all the debate on this issue, I must admit that I have a great deal of sympathy with what is behind the amendment. I also think that times have changed considerably. The atmosphere for putting workers of both sexes on a board was rather different and there was total hostility. I understand the Government's difficulty about putting this in the Bill, but it would be helpful if the Minister would go away and think about a possible wording that would reassure everyone on this matter. For the well-being of those who are involved, it is important that they are represented-whatever the form, or in whosever hands, the Royal Mail ends up in.

Lord De Mauley: My Lords, I thank the noble Lord, Lord Tunnicliffe, for moving his amendment and all noble Lords who have contributed to this debate. While the idea of an employee share scheme representative on the board may well have merits, it is for Royal Mail and its shareholders to decide how it will structure its board, just like any other company would. Thanks to this Bill, Royal Mail's shareholders will include its employees in the future.

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The noble Lord, Lord Clarke, spoke from his experience of the vital importance of effective employee engagement and communication. The Government wholeheartedly agree with him on that. The employee's shareholding is not the only way to create that engagement. I understand that there are a number of initiatives that Royal Mail is following at the moment which also contribute helpfully to that-for example, the world class mail initiative.

As we have already discussed, in the debate on Amendment 4 on Monday, we ask noble Lords to accept that it is not appropriate to impose the composition of a company's board through legislation. In fact, I am not aware of a single precedent where such an imposition has been made by statute. Furthermore, if this amendment were passed, it would mean that in the future a fully independent Royal Mail, which had no government shareholding, would be obliged to request new legislation if the company or the employee share scheme were ever to want to change the way its views were represented to the board.

I am grateful to the noble Baroness, Lady Donaghy, for her recognition that the scheme will enhance the modernisation agreement concepts regarding fostering better relations between the company and its employees. She raised the fact of employee representation on the boards of some European companies. Of course, my noble friend Lady Kramer is absolutely right that their corporate structures are very different to the typical United Kingdom board structure. The noble Baroness also gently questioned the Government's commitment to the concept. Perhaps I may tactfully say to her that, as the noble Lord, Lord Tunnicliffe, admitted in the debate on the previous amendment, the previous Government had to be pushed quite hard even to agree to contemplate an employee share scheme in the 2009 Bill; we are embracing this concept wholeheartedly.

Richard Hooper's reports for both this and the previous Government stated clearly that Royal Mail must be freed of the "spectre of political intervention". I ask noble Lords to accept that specifying the composition of the board in statute will not help with achieving this objective. I would therefore ask the noble Lord to withdraw his amendment.

Lord Tunnicliffe: My Lords, I thank all noble Lords who have participated in this debate, and I thank my noble friend Lady Turner for reminding us how modest this amendment is in providing for only "at least one representative".

As so often happens, the noble Viscount, Lord Eccles, probably lighted upon the essence of the debate, which is the extent to which such a provision should be on the face of the Bill. It is about whether there is uncertainty for the new owner or not. We disagree on that point. We want the new owner to know that there is going to be at least one employee representative on the board-I have to admit that we want to discourage an owner who would have difficulty with that. We want to take away the uncertainty so that, when Government are negotiating for either a trade sale or some other form of disposal, the new owner cannot resile from this provision. We believe that any owner who would have difficulty with it would not be good for the interests of the Royal Mail in the long term.

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My noble friend Lady Donaghy, whose chairmanship of ACAS was so important to a period of change in that direction, pointed out that, while the European structures are different, nevertheless the acceptance of significant board-level presence is part of their legal structure. There is significant employee representation, and large, successful European companies manage with that. Under the structure of our company law, the only way we can sensibly introduce such a requirement into the new structure is by including a provision about who should be on the board. It is a change of attitude, but we are living in a changing world.

I concur with my noble friend Lord Clarke of Hampstead that there was an important initiative in the 1970s on moving towards industrial democracy. I was involved in that on one side of the fence, many of my noble friends were on the other side, and we were starting to make some progress. In many ways I wish we had built on this so that we might not be having this debate now. We would probably be taking the involvement of the workforce for granted in the management of major companies, whether in the private or public sector, because we would have had years of experience of it working. I think that this is the time to set this down.

When I was on the government Benches, I always got a sense from my civil servants that, when they had run out of ideas, they scribbled on a piece of paper "Not appropriate". Another one that they would come up with was, "It is unprecedented". Of course, all law is about setting precedents, and we think that this is an occasion when this chance should be seized.

Clearly, I am not going to press the amendment today. We will read the Minister's words with great care, but we may come back to the issue because I think it is an important marker of the style and the character of company that we hope Royal Mail will become. With that, I beg leave to withdraw the amendment.

Amendment 20 withdrawn.

4.45 pm

Amendment 21

Moved by Lord Tunnicliffe

21: Clause 3, page 2, line 32, leave out "or include"

Lord Tunnicliffe: My Lords, this repeats an amendment already discussed in the Public Bill Committee of the other place, because we still do not really understand why the Bill is drafted as it is, so in that sense this is essentially a probing amendment. The current draft gives rise to concerns that the employee share scheme could be designed for people other than employees of Royal Mail. Do that on a wide scale and all the benefits of introducing such a scheme, which we have been through in previous discussions, will be dissipated. Of course we accept the narrow definition in the Bill of the employees of Royal Mail only, which could exclude former employees, but who else do the Government have in mind by the use of the term "or

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include"? Could it be other public servants, customers or competitors? Surely the scheme has to be centred on and be for the benefit of the employees of Royal Mail, whoever it is owned by.

The fault-line here, as in so many issues raised by this side of the Committee-some with the support of other Benches-is that the answer is, "It will be all right on the night. Royal Mail is going to be sold to a wonderful company with all the virtues and none of the faults of big business". I hope I will be forgiven for saying that, at the end of the day, it will be an average company because in the long term we are all average. We feel that this is the time for the Government to give a more specific response to this probing amendment in order to allay our fears. I look forward to hearing what the Minister has to say and I beg to move.

Lord De Mauley: My Lords, as the noble Lord, Lord Tunnicliffe, has explained, Amendment 21 relates to the scope of the employee share scheme. The words "or include", which through his amendment he seeks to remove, allow the employee share scheme to encompass those employees of Royal Mail who work for its subsidiaries, even if those subsidiaries do not fall strictly within the definition of a Royal Mail company in Clause 2. Royal Mail has a number of subsidiaries that do not themselves directly provide the universal service, but would nevertheless be considered to be part of the overall company infrastructure and play an essential role. An example would be Royal Mail Estates Ltd, which oversees Royal Mail's property portfolio. It is clearly our intent that those who work for any Royal Mail company be able to be part of the employee share scheme, but without the words "or include" in subsection (4), there would be significant legal doubt over whether the Government could extend employee shares to the employees of other group companies not strictly falling within the definition of a Royal Mail company.

We do not wish to create a situation where some staff in the group are barred by statute from being members of the employee share scheme. It would mean that they would not have the same incentives to engage with the business they work for and share in its future success. I do not believe that that is what the noble Lord, Lord Tunnicliffe, wants, and I therefore ask him to withdraw his amendment.

Lord Tunnicliffe: My Lords, it would be unprecedented for someone to rise from these Benches and say that they were wholly satisfied with the answer, and therefore I will not set that dangerous precedent. I will say that I like what I have heard, and I will study the noble Lord's words with great care, but in the mean time I beg leave to withdraw the amendment.

Lord Brooke of Alverthorpe: My Lords, I shall speak also to Amendment 21ZB. They are tabled in the name of my noble friend Lady Dean of Thornton-le-Fylde, who regrettably and unavoidably cannot be here today. She sends her apologies. My noble friend is currently a partnership director of National Air Traffic Services. Had she been here, she would have been able to give us the benefit of her current experience and no doubt update us on the prospects facing NATS employees, who may be moving towards 100 per cent privatisation in due course. As many noble Lords know, I was previously a partnership director of NATS, so both of us have some experience of a reasonably successfully scheme for handling employee share ownership.

There are a variety of ways in which shares can end up in the hands of employees when privatisations take place. Since the first in 1982, when 90 per cent of the shares in British Aerospace eventually went to employees, there has been a range of offerings-nine or 10 privatisations. The majority were done through institutional public offerings in which employees picked up individual shares and as owners of shares were no different from people in the market. In 2001, when the public/private partnership for NATS was formed, we saw a novel approach adopted. It involved only 5 per cent of the shares. As is often the case when we come to legislation, there is an untold story. It is that had the unions been more willing to participate in planning for the change in 2001, they would have ended up with 10 per cent of the shares rather than the 5 per cent that was eventually the case. When reference is made to the Labour Government not offering shares in the Bill introduced by my noble friend Lord Mandelson, I suspect that had it had a different reception in the other place there is a distinct possibility that shares would have been on offer to the employees, probably in excess of the 10 per cent currently being considered by the Government. I hope that when we look at the 10 per cent and the way the offering is structured we use those untold stories usefully.

These amendments are, to a degree, based on the experience that the noble Baroness, Lady Dean, and I have had in running the trust scheme within NATS. A direct offering to employees could happen with an IPO, so that the shares disappear all over the place afterwards. It is difficult to conclude that employees have been greatly motivated by what has happened with previous share offerings, although I would not deny that entirely. This amendment seeks to engage the employees more with the company. Paragraph (a) proposes that all shares should be held for the benefit of employees in a trust. I know that this may not be entirely acceptable to all the employees. Some of them might want to get their hands on the shares and to dispose of them at the appropriate point. However, I believe that in the best interests of the company and its employees it would be far better if they are retained in a trust holding, so that while employees are working with Royal Mail they get a return on the investment of those shares during the period they hold them.

Paragraph (b) states that,

"a dividend of equal amount shall be paid in respect of each share held by or for the benefit of any employee".

The argument behind this is that all employees should be treated the same whether they are a postman or the

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CEO. There should not be differentiation in the way that shares are allocated. An equal dividend should be paid out in equal shares on an equal footing.

We then move on to Paragraph (d). In the NATS scheme, the shares are evaluated each year by an independent company because they are not on the market. The shares have changed in value over the years while they are being held by an individual. When employees then come up to retirement, they know what the value of their share is at the end point, and they then get the money in lieu of their shares, which then go back into the trust. The 5 per cent stake that the employees have within NATS is maintained at 5 per cent on a continuing basis, and the employees maintain their continuing interest in the company. Similarly, this amendment is seeking to establish an arrangement whereby they would not cash them in and sell them to other people but the shares would be retained within the company. When they left the company, the shares would then go back into the trust and be reallocated to new employees who would be joining the company in subsequent years.

The Government already have plenty of experience with such a model in the light of what has happened since 2001 with NATS. I hope, as I mentioned earlier, that we might reach a better arrangement, whereby a representative or representatives of those employees with the shares would find their way to have more influence in the company than they might under the present arrangement with NATS, but that is not covered in this part of the amendment. I hope that the Government are going to be prepared-in the light of the experience with NATS-to look at this very favourably indeed. The amendments are intended to be constructive, not destructive. I hope we might find ways in which we could put more in the Bill than we did when we dealt with the NATS PPP float, where it would have given greater confidence to the employees about the way in which it was going. I believe it would be helpful to anybody who is prospectively looking to purchase the company.

As an aside, for those people concerned-and I am one of them-that Royal Mail may eventually end up in foreign ownership, in the way that so many of our privatised utilities have over the years, this in a sense could be seen as a form of a golden share in retaining a significant British interest in it too, as the employees would be based in Britain. I see the noble Lord, Lord De Mauley, is going to respond-he responded with great comforts on Amendments 18 and 19, although a little less so on Amendment 20. I hope when he comes to respond to Amendments 21ZA and 21ZB he will revert back to what he did previously and be very comforting.

Lord Razzall: My Lords, the amendment is extremely constructive. However, I have a concern, which is the one echoed by my noble friend Lady Kramer. For those of us who argued long and hard during the last Bill for an employee share structure-which was resisted by the then Government-I am worried that we should be too prescriptive at present as to the form that the employee share scheme should take. Those of us who have had experience in the private sector in employee share schemes know that there are a lot of ways to

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skin that particular cat-this may well be one of them, but, having fought and won the battle to get at least 10 per cent held by an employee share scheme, I am worried that we will overcomplicate the Bill.

Lord Young of Norwood Green: My Lords, a number of noble Lords have drawn attention to the umpteen privatisations of the 1980s and 1990s which contained an element of employee shareholding. However, time after time, the shares held initially by employees found their way into the hands of institutional or speculative shareholders. They may have started out as employee shares but they did not stay as employee shares for long. What can be done about this? I do not intend to reiterate the very cogent points made by my noble friend Lord Brooke in relation to the experience of the National Air Traffic Services scheme. However, I will respond to the point made by the noble Lord, Lord Razzall, about being too prescriptive. If there are viable alternatives, no doubt the Minister will deal with that in his reply, and I await it with interest.

The amendment proposes that all shares held for the benefit of employees would be held in trust. That may be difficult to accept for some employees who would rather be able to cash in the shares; I speak from my BT experience. I will not go into the details of that, but certainly a lot of cashing in went on at the time.

5 pm

Lord Razzall: Tell us about it.

Lord Young of Norwood Green: No. Sorry to disappoint the noble Lord; I see that he is returning to his previous night's form. There needs to be some return on the investment that the employee can anticipate.

The amendment proposes that a dividend of equal amount would be paid in respect of each share held by or for the benefit of any employee. When paying a dividend, it is important that all shares are equal and everyone is on an even footing, regardless of where they are in the company. That is an important principle.

The amendment proposes that no employee eligible to receive shares under the scheme would be permitted under the rules of the scheme to dispose of those shares to any other person. If we are serious about a stake in the company being held by employees, that is an important point. To prevent seepage turning into a flood of shares out of the scheme, as we have seen in the past, it is important to ring-fence the shares in the proposed scheme.

The amendment proposes that, on leaving employment, shares held by employees could be disposed of only by way of a transfer for consideration to the trust. It is fair that employees who leave employment and leave the scheme would be able to capitalise on their shareholding-that is one of the incentives of the scheme. To maintain the integrity of the scheme, though, they should dispose of the share back into the scheme.

The amendment proposes that the consideration payable under paragraph (d) would be an amount equal to what the market value of the shares would have been. To achieve a fair result for departing employees, a fair price for the share would be established in the

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absence of an open market. That would not be very difficult if other shares in the company were being traded. If this is not the perfect formulation of our ideas or improvements could be made, I hope that the Minister will take this away, give it serious thought and come back with an improved proposal to meet the same objectives.

It is a shame that the noble Lord, Lord Hunt, is not in his seat. In a wistful diversion down memory lane last week he reminded us of the "Tell Sid" campaign, conducted to boost interest in the privatisation of British Gas. We were told that Sid was the name of an uncle of the late Lord Walker of Worcester, who was the Secretary of State responsible for the sale. It is a bit ironic that the British Gas share advertisements featured a series of people so anxious to alert Sid to the share flotation that one of them was a postman who got knocked off his bike in the excitement. The mind boggles. If the postmen or postwomen of Britain are to be induced to fall over in the excitement at 100 per cent privatisation of Royal Mail-somehow I doubt it-perhaps the Government should address some of the questions raised in this amendment. They are serious; they make a constructive contribution and improvements so that a good idea becomes a very good scheme. I support the amendment.

Lord Christopher: My Lords, I apologise for having been diverted to another meeting. There are two issues that concern me on which I would be grateful if there were some comment. There is an assumption that there will be a market in these shares, and I am not at all clear that that will necessarily be the case. If there is not, how is it proposed to deal with that situation?

I may have missed the point on the other issue. Assuming that something like the amendment goes through, we have an employee share scheme of this nature and shares are sold back, will we reach a position where all the shares are in the hands of this trust, or whatever it may be called? How will we deal with that situation?

Viscount Eccles: My Lords, both the possibilities outlined by the noble Lord, Lord Christopher, could indeed happen. Again, that reinforces the difficulty of Parliament setting down conditions that will need to be thought through in circumstances that may be very different from those that we in this Committee envisage.

Lord De Mauley: My Lords, Amendments 21ZA and 21ZB relate essentially to the design of the employee share scheme. As the noble Lord, Lord Brooke of Alverthorpe, explained, their broad thrust would be to ensure that shares are placed within an employee share trust. His proposal is helpful and constructive. I thank him and, in her absence, the noble Baroness, Lady Dean, for raising the issue. I know that they both have a wealth of experience in this area.

As the noble Lord explained, an employee share trust certainly has attractions, particularly for its ability to deliver the Government's objective to ensure a long-standing employee stake in Royal Mail. The Minister for Postal Services has been clear in the other place that he sees these attractions; certainly, he does not discount the matter. However, like my noble friend

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Lord Razzall, we believe that it is important to keep options open on the design of the scheme until we have reached a firm decision on the form of the transaction. After all, individual share ownership has its own merits, giving the employees a very real sense of ownership.

As I have said, the design of the scheme will in part depend on the type of sale we undertake. For example, individual share ownership could be more appropriate if Royal Mail were floated. In that case, the question of the noble Lord, Lord Christopher, is answered because there would be a public market in the shares. It could also make sense-I think that the noble Lord, Lord Tunnicliffe, touched on this earlier-to have some combination of a trust and individually held shares. I spoke about this area more generally at some length in the debate on Amendments 18 and 19, as I did about the risks of recipients cashing in their shares early, and I am sure that noble Lords would prefer me not to repeat myself.

As I said when we discussed Amendments 18 and 19, paying equal dividends to each employee is a laudable objective. However, there are other sensible methods of allocating shares, and therefore dividends, to employees. I mentioned that in some schemes shares are allocated depending on length of service.

As regards restricting the sale of shares to anyone but an employee share trust, I can again understand the noble Lord's concerns to ensure that the employees' stake cannot be diluted by shares being sold to third parties. However, again this would place an undesirable restriction on the design of the scheme and would prevent us allocating shares to individual employees, if we thought that was appropriate at the time.

As I said earlier, it is in fact very unusual for a Government to commit themselves to an employee share scheme on the face of legislation. For example, I believe that-the noble Lord, Lord Brooke, will correct me if I am wrong-there is no similar commitment in the Transport Act 2000 to create the NATS employee share trust. I hope that all noble Lords welcome this upfront commitment to employee shares at Royal Mail but accept that it would not make sense to go even further and prescribe the particular detail of the scheme in legislation. For these reasons, I ask the noble Lord to withdraw the amendment.

Lord Brooke of Alverthorpe: My Lords, I am grateful to all who have contributed to the debate. I am grateful to the noble Lord, Lord Razzall, for contributing but not for what he said. I am grateful to the noble Lord, Lord Young, for his support. I say to the noble Lord, Lord Christopher, and the noble Viscount, Lord Eccles, that I accept the Minister's view that in many respects the form of the transaction will determine the structure of the offering to employees. However, as I said, I do not think that we will get an IPO. I believe that in earlier debates, the noble Viscount, Lord Eccles, said that he would be very surprised if we did, in which case we are talking about a different kind of structure whereby we sell direct to a company or group of companies, which in turn could create the trust advocated in these amendments. In the event that no market could be used as the yardstick for determining what the dividend or the annual growth in the value of

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shares should be-although one hopes that they will grow in value-we could turn to a mechanism based on the experience of using independent valuations of what NATS shares would fetch if they were put on the open market.

I recognise that there are problems with being too precise in advance, but, as I have said previously, the more that could be put in the Bill, the more encouraging and supportive it will be to staff who will go into this with disquiet and anxieties. It would also be better for prospective purchasers to know what they are buying into and plan accordingly. However, the Minister's response has provided more comfort than I perhaps anticipated, given his earlier response to Amendment 19. I beg leave to withdraw the amendment.

Amendment 21ZA withdrawn.

Amendment 21ZB not moved.

Clause 3 agreed.

Clause 4 : Restrictions on issue and transfer of shares and share rights in a Post Office company etc

Amendment 21A

Moved by Lord Whitty

21A: Clause 4, page 2, line 36, at end insert-

"( ) No disposal of the Crown's interest in a Post Office company may be made before-

(a) the Secretary of State commissions and publishes an independent assessment of-

(i) the current financial position of that Post Office company; and

(ii) the projected financial position of that Post Office company in the subsequent reporting period; and

(b) the Post Office company is profitable for two successive financial years, excluding payments from government for services of general social and economic interest."

Lord Whitty: My Lords, I support the other amendments in the group. We move on to the future of Post Office Ltd. After debating the potential conditions for a minority mutual share in Royal Mail, we are now talking about the possibility of the complete mutualisation of Post Office Ltd, or sub-companies thereof.

In many respects, that is an entirely different proposition, because more than 90 per cent of the outlets of the post office network are already owned by small businesses. It is not clear how the Government intend to mutualise the overall arrangements. I take for my text the useful publication, Securing the Post Office Network in the Digital Age, produced by the noble Baroness's department. It refers in general terms to the Government's belief that,

"a mutually-owned Post Office Ltd could be ideally suited for the economic and social role that the Post Office network provides".

The report also talks about the possibility of basing the mutual on a combination of employees, communities and franchisees-sub-postmistresses and sub-postmasters. However, it is clear from the text that the Government do not have a clue how this will be delivered and are

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therefore, rightly, seeking advice from Co-operatives UK and other bodies that are experienced in mutualisation.

Given the premise of the Bill-as noble Lords will know, my basic instincts are in roughly the same territory as that of my noble friend Lord Clarke of Hampstead-and given that Royal Mail is to be privatised, and Post Office Ltd and Royal Mail are to be separated, we should explore the prospect of potential mutualisation in that area. However, in order to achieve a mutualised Post Office Ltd, we need to ensure that there is a viable, sustainable and profitable post office network. Although the Government in this document and in other pronouncements have indicated their commitment to that, it is built on somewhat feeble ground.

I quote from the final paragraph of the report, which states:

"We are committed to the future of the Post Office network. It is uniquely important to communities across the country but is on a worrying trajectory of decline. As we have set out in this policy statement, we are dedicated to turning the Post Office around. This will involve a major refresh of the network and its products, and the Post Office turning the size of its network to its advantage".

That, as an introduction to a prospectus, is not hugely upbeat. It suggests that there are a number of question marks over the future of the network, some of which we have touched on in earlier debates, and some of which arise from other aspects of government policy.

The Government claim that they are committed to preserving the current network, more or less. However, there are at least four aspects of government policy that undermine that commitment. The Post Office potentially has a fantastic national network and is a very good front office of government in almost every community. It can provide a range of financial and other services and can be a major part of the logistical network for post, parcels and digital services. However, at the moment there are a number of question marks over it. Only last week, for example, we saw a continuation of the regrettable trend, admittedly started under the previous Government, of taking away government business from the post office network; I refer to the decision of the DWP to take a major benefits contract away from the Post Office. That is another blow to the sustainability of the network resulting directly from a government decision.

As we heard in the debate the other night, there is an almost incomprehensible reluctance on the part of the Government to commit themselves to a long-term inter-business agreement between Royal Mail and the post office network within the new structure. As I said then, I am not committed to the IBA being in exactly the form it is now. Clearly there are legal difficulties, to which the Government have referred. However, unless there is a stable relationship between Royal Mail and the post office network, another substantial part of the potential income of the network will begin to look extraordinarily uncertain.

In addition, we have had the rather lukewarm response of the Government to proposals for the Post Office to extend its services. In particular, I am surprised that the Government so precipitously rejected what we were working towards under the previous Government-and which was greatly supported by my former

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organisation, Consumer Focus-namely, the extension of Post Office financial services, and in particular the provision of those services to people who are outside the main banking system. We have seen positive moves towards being able to use the Post Office in the mainstream banking system: RBS recently signed up to that. Now one can access the majority of major high street banks via the Post Office. The problem with the financial services market is that roughly 20 per cent of the population are excluded from it; they do not have basic banking facilities and do not have access, physically and in terms of credit, to those financial services. The Post Office could very simply bridge that gap at a point that would be close to most families.

I am surprised that the Government have abandoned that proposition. There have been more encouraging words about providing additional services, but it is very strange that they have closed the door on the provision of a banking service. Another Commonwealth country, New Zealand, has made a recent and spectacular success of using the Post Office as a banking system throughout the country. We should look at such examples for this country.

Therefore, there are dark clouds over the future of the network. Noble Lords will recognise that that means there is some uncertainty as to whether we could successfully mutualise the network and Post Office Ltd. In the same document, the Government indicated that for a mutualised Post Office Ltd to be successful, it must be able to build on solid foundations, and that mutualisation will be an option only if the network is financially viable. It is not specified how it can be made viable, how the assessment will be made or how the conditions of financial viability will be determined.

The amendment proposes an independent assessment of the financial position of Post Office Ltd, including its future commercial viability. It proposes also that, before we moved to mutualisation, whatever that may mean, we would need to have seen two years of profitable operation of post office Ltd prior to the decision in principle being taken. That is exclusive of the subsidy which the Government have for the next few years committed to the post pffice network. There is no commitment beyond that, and therefore any assessment of financial viability would have to be on the basis of excluding the government subsidy. Both the assessment of the network's viability and of the proven profitability of that network would have to be established before mutualisation could go ahead.

I am not opposed to the mutualisation of Post Office Ltd. I can see many major advantages, not least to consumers and vulnerable consumers, particularly in rural areas and the outer suburbs. I am not at all opposed to the Government's concept, given the premise of the Bill. However, in order for it to work we need to have established, effectively and robustly, that there is a viable company and a viable network.

I hope that the amendment would provide the means whereby we made that assessment, and would make it clear in the Bill that such an assessment needed to be made before we took the next step. I beg to move.

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Lord Borrie: My Lords, I support my noble friend Lord Whitty. He has made a powerful speech not only on the merits of mutualisation, which are largely supported in principle by Her Majesty's Government, but on the real difficulties of moving to it with any great speed at present.

I have a guilt complex about mutualisation because in the 1990s I was a non-executive director of the Woolwich Building Society, a splendid body with advertisements which many people remember to this day; "I'm with the Woolwich", they said. I am afraid that I was one of those who followed the lead given by the executive directors, who I of course realise were going to benefit directly as a result. The building society gave up its position as a building society and became a limited company. Not long after that, it was taken over by one of the four leading banks. So, as I said, I have a guilt complex, which has led me-I hope not too far in the opposite direction-to be generally in favour of the idea of mutuality.

I was unable to take part at Second Reading, but I notice that, in principle, there were several voices favouring the creation of a mutual to run the post office network, including the noble Baroness, Lady Wheatcroft, from the Conservative Benches, who is not in her seat today, and others. We all know that the Secretary of State, Dr Vince Cable, had indicated even before our Second Reading that the Post Office was "ideally suited" to the co-operative style of structure, where employees-sub-postmasters, sub-postmistresses -and individuals in communities would all have a greater say in how post offices are run.

When the National Federation of Sub-Postmasters spokesman, Mr George Thomson, addressed the Public Bill Committee in another place on 9 November last, he was "very supportive" of the concept of mutualisation of the post office network and particularly attracted, he said, by the John Lewis model. "However", he added, expressing it rather more strongly than my noble friend Lord Whitty, the Post Office,

He then expressed great doubt that it was because it was, he said, a "basket case" at the moment.

At Second Reading, Peers who favoured mutualisation were just as doubtful, although their language about the immediate prospects might have been less extreme. My noble friend Lady Kennedy of The Shaws, who had another meeting this afternoon but who hoped to be in the Chamber for these discussions, said that mutualisation would not now make "economic sense".

As my noble friend Lord Whitty has said, Co-operatives UK has been asked by the Government to consider the options. Will they go for a producer co-operative along the lines of John Lewis, which I have already mentioned, or a consumer co-operative like the Co-op shops, or will it be some form of hybrid? The intention behind this amendment is to unravel that over a period of time and come up with a suitable solution, but I am sure, like the many who spoke on this subject at Second Reading, that my noble friend Lord Whitty is just as much in favour, in principle, of a mutual set-up as they were.

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Lord Young of Norwood Green: My Lords, I shall speak to Amendments 21C and 22ZA to 22ZD, and comment on the other amendments in the group, Amendments 21A and 22. This is a large group of amendments and I ask the Committee to bear with me.

Generally, this Bill pumps questions on issues of accountability, considering the enormous step that it proposes for one of our most cherished institutions and the number of vague answers that we have to questions about the sale of Royal Mail and the future of the post office network. With proposals relating to the disposal of shares in Royal Mail, to the nationalisation of the pension scheme, to the regulatory regime and to the mutualisation of Post Office Ltd, greater accountability to Parliament should be built into the Bill before it receives Royal Assent.

The Bill instructs the Secretary of State to lay a report before Parliament once he has taken a final decision on the transfer of the Post Office Counters business to a mutual body. Once again, there is no promise of an oral Statement, no debate, no chance to amend and no vote. These amendments offer the House an opportunity to scrutinise the Government's later proposals in detail, including their plans for mutualisation. Several years may elapse between the Bill receiving Royal Assent and the transfer to a mutual organisation, but it is important that Parliament is able to scrutinise and approve the proposal when it comes into effect. Are we being denied the opportunity to scrutinise fully because to do so might cause real difficulties for the Government, or will the cold forensic light of parliamentary scrutiny undermine the foundations on which this Bill was laid?

We will not know the answer to that unless Parliament is able to consider future important actions and their implications more fully. So many questions remain unanswered. We are asked to take a leap in the dark about how Royal Mail will be sold, about what sort of Royal Mail will emerge in the private sector, and about what obligation a privatised Royal Mail will be under to utilise the post office network. A great deal of concern has already been expressed about the nature and continuity of an inter-business agreement. In the case before us, of Post Office Ltd, we are also asked to take a leap in the dark about the type of mutual body or range of mutual bodies that might end up owning our post office network.

What will the rules be? What will be the extent of the mutual? Who will be eligible to be a member? Are all to be equal or will some be more equal than others? How will the board be constituted? Could the mutual sell off assets? Could the owner sell on to another mutual, such as a building society, store group or a mutual set up for that purpose? Could mutualisation end in disintegration? How will a mutually owned Post Office ensure that it is on a sound commercial footing? What tests would a potential owner have to pass?

It might be far fetched, but what is to stop Rupert Murdoch's family or someone else associated with a communications company setting up a mutual body as a vehicle for running the Post Office? Is the Minister setting a timescale by which the Government intend to complete the mutualisation process, or is this an open-ended process? Who will be accountable for the success

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of the Post Office when it is in mutual hands? There is a provision for an annual report, but what about a Secretary of State annual report? I hope that the Minister will take the opportunity to make clear whether the Secretary of State will be responsible. If he will not be, who will be? What are the safeguards to prevent a mutually owned Post Office Ltd from suffering commercial decline or even catastrophic financial collapse?

5.30 pm

Will the Government remain the lender of last resort should a mutualised company go into bankruptcy? Will the borrowings of a mutualised company continue to count against the Government's borrowing requirement? Will a mutualised business be given full commercial freedom, including the freedom to borrow capital on the markets? Will any mutualisation plan include a detailed business plan for the long-term relationship between Post Office Ltd and the Government in respect of the services that it provides for various departments, including the DfT and the DWP? I must admit that the recent decision on awarding the green girocheques contract leaves us more concerned rather than less, despite the Government's protestations that they are committed to future government services being provided by the Post Office. Does Royal Assent for the Bill mean that Parliament has no further role in scrutinising the proposal, even if it is delayed for some years?

These amendments seek to ensure that if the Bill goes on to receive Royal Assent, the Minister will at least be required to return to the House to seek approval for the next step that he wishes to take on the Government's plans for mutualisation. That is very important, as the Bill is significant. Its provisions will have a major impact on users of the postal service, and even more so for the employees and agents of Post Office Ltd. It will also have a significant impact on the Exchequer. Such a proposal surely deserves closer scrutiny.

We accept that the process of establishing a mutual will take time and that an appropriate mutualisation structure will need to be agreed. An external organisation might operate that structure or the employees, managers and agents of Post Office Ltd might run the mutual. Then there is the process of negotiation with the employees and managers, who will be asked to agree the terms of the transfer to a new status. The Government cannot possibly be in a position to share with Parliament the mechanics of that arrangement now, so it is essential that Parliament is able to look at this once again and approve the final arrangements.

A transfer to mutual ownership of this kind is extremely rare. It is possible, for example, that the new mutual organisation will be entirely new to the Post Office. It may be in the form of a mutual structure yet know little about postal service matters. That in itself would not necessarily debar such an organisation from owning the Post Office as a mutual, but Parliament will want to be assured that the right organisation has been appointed to run that body and that those who are affected by the outcome have been consulted. Equally, both Houses will want to be assured that the new entity has a robust business plan. As my noble friend Lord Borrie pointed out, the finances of Post

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Office Ltd are somewhat precarious. Its commercial relationship with Royal Mail is being threatened, as is the value of its work with its other principal customer-the Government.

The business is reliant on subsidy to maintain its network of post offices. From the outside, the prognosis is not good. My noble friend Lord Borrie has already quoted from the evidence that George Thomson, the general secretary of the National Federation of Sub-Postmasters, gave to the Public Bill Committee on 9 November. He pointed out that the federation has been working on the mutualisation concept for over two years, saying,

"we are very supportive of the Post Office eventually becoming a mutual company".

He went on to describe its financial status, which I will not repeat as my noble friend Lord Borrie has already detailed his rather graphic language. The general secretary went on to say that,

"there is a lot of work to be done before the funding package really kicks in in April 2012"-

that is, the Government's funding package-

"because we have 18 months of sub-postmasters being up against very strong headwinds to survive and keep their office alive in the community".-[Official Report, Commons, Postal Services Bill Committee, 9/11/10; col. 29.]

That was the evidence of the National Federation of Sub-Postmasters: in favour of mutual ownership but really fearful of the financial stability of the Post Office going forward.

In those circumstances, a robust business plan, as proposed in Amendment 22ZD, is an essential aspect of any organisation seeking a change of ownership. Parliament must be able to consider the non-confidential aspects of that plan. Amendment 22, in the name of my noble friend Lord Kennedy, asks that the report be made after a period of no more than two years, which is surely a reasonable request. Amendment 22ZA requests that the approval be sought,

"before any transfer is made",

not after the horse has bolted, while Amendment 22ZB specifies that the "preferred purchasers", if any, should be identified. The latter also calls for the report to be supplemented by an oral statement and an order,

"subject to the affirmative resolution procedure".

Amendment 22ZC would require that the report is subject to a vote in both Houses of Parliament, and Amendment 22ZD would require a sustainable business plan for the Post Office company to be set out to secure a viable future.

I particularly commend the amendment moved by my noble friend Lord Whitty because it would require an independent assessment of the current financial position and projected position of the Post Office company. It would also require that the Post Office company had been profitable for two successive years, excluding payments from government for services of general, social and economic interest. In other words, it needs to walk before it can run.

This wide range of amendments would insert a greater degree of accountability at the point when the Government decide to hand over the Crown's interest in a Post Office company to a mutual of some sort.

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The mutualisation proposal in the Bill is radical and far-reaching. That does not mean that there is opposition to the proposal, which we support in principle. This is about the magnitude of the decision and the importance of the post office network and the affection with which it is held throughout this country, and the Bill does not provide enough detail. We acknowledge that it is difficult for the Government to set out at this point exactly how mutualisation will work. Nevertheless, the amendments would ensure that if the Bill receives Royal Assent, at least the Minister will be required to return to the House and seek approval for the next step that the Government wish to take in respect of plans for Post Office mutualisation.

Lord Cameron of Dillington: My Lords, the profitability of post offices, touched on by the noble Lord, Lord Whitty, and the need for a sustainable business plan, as set out in the last amendment, is important to me. It will come as no surprise that I come at this from the perspective of rural post offices, and it is here that I wish to probe the Government's plans. Amendment 22ZD, on a sustainable business plan, seems to me the best place to raise all my questions. Although I considered spattering them into a whole series of amendments that we have yet to come to, I hope that your Lordships will allow me to put them all under this one umbrella.

Rural post offices are a key thread in the web of rural communities. If you can imagine a web on an old barn door, you cut a key thread and the web collapses. It is the village shop that is the key, but the post office represents the cornerstone of viability to that shop as it can greatly increase the footfall in these shops. Research shows that it can increase the footfall by 15 per cent or more. Quite apart from the invaluable services that local shops provide-particularly to those in rural areas without transport, which includes the very old, the young and the poor-it is the footfall in those shops that is the key benefit to the community. It is a place where old Mrs Jones can meet up with the young Master Smith. That seems a strange request, but the old and the young have different groupings in rural villages and it is really important for the sustainability of that community that there is a cross-fertilisation between the groups within it. That can only happen in a village shop.

I am keen to probe the Government on how they intend to keep the current network of rural post offices profitable and the sort of sustainable business plan they have to ensure that they can keep to the promise that they made in the November document, referred to by the noble Lord, Lord Whitty, which states:

"We will maintain the network at around its current size".

That document sets out how the new flexible service will attract new customers, and claims that it has already done under the new post office local programme. I have my doubts that this will be enough in the long run to give the much needed boost of confidence to potential sub-postmasters to pick up the gauntlet to invest in a new business in a rural area that will probably give a very limited return, that requires a huge degree of skill in accounting, stocktaking and people skills and that involves very long hours. Somehow this vital job needs to be made more attractive. A post bank, as mentioned by noble Lord, Lord Whitty,

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would be a sure way to give that confidence. I endorse all his words on the subject, especially with reference to the huge success of such a scheme in New Zealand. A firm commitment in this area would give confidence to potential sub-postmasters.

How are the Government going to ensure, in that crucial plank of their sustainability plan, that government departments will deliver their services through post offices? There is no way in which that will happen if there is a cheaper route. Once the £1.34 billion that the Government are putting in has run out, in four years' time post offices will once again start to close. I suspect that most of those closures will be in rural areas. The noble Lord, Lord Whitty, has already referred to the DWP's reluctance to use post offices and to its closing down the contract on the green giros, which brought about £15 million per annum into the post office chain.

The trouble is that the DWP and other departments will always follow the cheapest route. Of course, the cheapest route might be the internet. It is not necessarily cheaper for a lot of people, because it ignores the cost of owning a computer and accessing the training if you happen not to be part of the computer age. Some people in remote rural villages find that difficult. As an aside, I put in a plea, vis-à-vis long-term sustainability, that the Government use part of the £1.34 billion to equip post offices, where necessary, as mini-internet cafes and to pay sub-postmasters to help the digitally excluded in rural areas to access government services via the internet. That would be a helpful service for the Government to invest in.

It is typical that where post offices are most threatened-in remote rural areas-internet broadband connections are all too often non-existent. To put it the other way around, post offices are essential in the delivery of services where no broadband exists.

My question remains: how will the Government persuade their departments to use the Post Office? Local government services are another possibility, but under the current cuts and financial stringency how can the Government twist enough arms to make local authorities deliver through post offices as opposed to the cheaper option of using their sparse and increasingly rare local authority offices? I say that that is the cheaper option, but it is not really cheaper; it is certainly not cheaper to the consumer, who has to pay increased transport costs to get to the outlet. We should bear in mind that all too often the consumers who want to access those facilities are those who can least afford such costs.

All the recent trends in this area seem to be for the Government to reduce their use of post offices for the delivery of government services. What are the Government going to do to reverse that trend? How will they maintain the network at its current size? Do they have a sustainable business plan? I hope that the noble Baroness will be able to answer me.

While we are discussing Clause 4 and the possible mutualisation of the Post Office, do the Government intend in the near future to introduce a majority of sub-postmasters on to the board of Post Office Ltd as a trial run to see whether sub-postmasters running the Post Office company helps? I think it would. I realise

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that that is a bit of a googly to throw at the Minister, so I would be happy for her to answer that question in writing.

Baroness Donaghy: My Lords, in supporting the amendments, I want to deal with the potential political fallout of getting it wrong. The Government gave a reassurance in an earlier debate that there would be no programme of closures. We all know that you do not need a programme to have a continuing and worrying number of post office closures. The Government may well succeed in being hard-headed-and, dare I say, hard-hearted?-about the role of employees and in their business-first approach to Royal Mail. However, when it comes to the Post Office, the potential fallout is another matter. There was a huge loss of good will for the previous Government, my Government, because of the number of post office closures. As noble Lords know, 900 post offices are up for sale, and a significant proportion would not be considered financially viable unless there was an inter-business agreement with teeth. It might sound strange coming from me, but I would like to praise the Daily Mail's post office campaign, which has been one of the most effective for any political party in its dedication and coverage.

I do not think we should underestimate the amount of political capital which will be used up by any Government who fail to ensure a successful future for the Post Office. It may be more valued by the older person, but it is the older person who votes. So in supporting these amendments, we are looking for an assurance from the Government that whatever pattern falls out-whether it is a mutualisation or whatever-a very strong effort will be made to have an inter-business agreement which protects the future for sub-postmasters and for as many post offices as possible.

5.45 pm

Lord Razzall: The noble Lords, Lord Whitty, Lord Cameron and Lord Young, have raised some extremely relevant and interesting points on this important issue, and I find myself very split. The noble Lord, Lord Whitty, confined his remarks primarily to Amendment 21A, and I find that difficult to accept as somebody who, as the noble Baroness will be aware, has argued strongly for the mutualisation of the Post Office. I am concerned that we should put in the Bill-it is exactly the same argument we had on the previous provisions-restrictions that would be likely to slow down the mutualisation of the Post Office. I am sure the noble Baroness will deal with that in her remarks.

Everything that the noble Lord, Lord Cameron, says is entirely correct. I know, as does the noble Baroness, that the Ministers in her department are convinced that they will have a package that will provide financial security for the Post Office. Whether there is a constraint of coming out with detail before the Budget or before it is finalised I do not know, but I think that before this Bill is passed, it would be extremely helpful if noble Lords could be made aware in more detail of the exact package that the Minister's colleagues in the department are confident could secure the future of the Post Office.

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I hope that the Minister will reflect on the remarks of the noble Lord, Lord Young, because these are extremely important issues. Having made the point endlessly in debates on Bills in opposition about the importance of Parliament sanctioning important decisions, I think the principle is important that, before any significant mutualisation of the Post Office takes place, Parliament needs to have a final say. I hope the noble Baroness will take that point back for consideration.

Baroness Howe of Idlicote: My Lords, I sympathise with these amendments. They reflect a number of concerns that those of us who spoke at Second Reading raised. I was certainly one of those as far as mutualisation was concerned. I had a great deal of sympathy, too, for the concept of banking in local post offices, but that has clearly been firmly ruled out by the Government. That does not mean, however, that they should not be thinking of ways in which they could satisfy the concerns. There should be some return to Parliament for an assurance that the route down which the Government are going will be in the best interests of those concerned. I thought the comments made by my noble friend Lord Cameron about rural areas were extremely important. The post offices are important for the sustainability of those local areas.

I hope that when the Minister replies she will feel able to give more assurance than we have had so far on this issue. I commend the amount of money available and the way in which the Government have thought through this Bill in order for it to be sustainable for the future. However, despite all the money-we will no doubt hear details after the Budget of other ways in which the Post Office and postal services will be helped-it would be in everyone's interest if the Minister could say that there will be a hard look at reassurance on some of the many important points that have been made in this group of amendments.

The Archbishop of York: My Lords, under Amendment 21A, one of the greatest regrets about the manufacturing base of this country is that companies in the public interest were disposed of without the kind of assurance that is being asked for here. If we look at steel, coal-mining and our car manufacturing bases, public interest in those companies was disposed of in the hope that the people who took them on would make them more viable, but when they took them over they explained that these businesses were not viable. Before we knew where we were our car manufacturing base and our steel industry were not about any more.

It worries me that if you get rid of any public interest-in the case of the Post Office, it is the Crown's interest-before you are quite certain that whatever company is created will be viable at least through some financial times, you will be in real difficulty. It would be very easy for whoever takes these organisations on to say "By the way, when we looked at the books, they were not what we thought they were". Then someone else buys it and takes it on, and before you know where you are the Royal Mail and those other places are not about.

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Although it is difficult to put it in the Bill, the assurance that this amendment seeks is absolutely necessary. As long as there still is Crown interest in the Post Office, there is a chance that we may do it properly. As soon as that goes-before there is the assurance sought in this amendment-I am afraid that we may end up with what happened to British Steel, coal-mining and the car industry.

Baroness Wilcox: My Lords, here we are on day three eventually at the issue of the Post Office and all the concerns that have been expressed today. The noble Lord, Lord Whitty, raised a number on the future of the post office network, as did the noble Lord, Lord Cameron, the noble Baroness, Lady Howe, and the most reverend Primate. These will be covered by a number of amendments that follow and I ask noble Lords if I may respond to those points in those debates.

On the future relationship between the Royal Mail and the Post Office, I hope that my commitment to the noble Lord on Monday to consider his amendment to include information on that relationship in the Clause 2 report provides him with some comfort. This group of amendments relates to the circumstances in which the Secretary of State can transfer his interest in the Post Office to a relevant mutual and the information which should be furnished to Parliament in connection with that transfer. This Government believe that mutualisation of the Post Office could be ideally suited to the particular economic and social role it plays up and down the country. We understand that sub-postmasters, sub-postmistresses and other stakeholders would highly value the opportunity to have more of a say in how this well loved institution is run.

We envisage that a mutual Post Office Ltd could allow communities to tailor services to their needs and give those who know the Post Office best a greater stake in the future of the institution that they value so dearly. Indeed, the many community-run post offices across the country demonstrate that this can work. Clause 7, which we will discuss in due course, ensures that any mutual must act for the public benefit. No Post Office mutual will exist solely for the financial benefit of its members.

Clauses 4 and 7 work together to set clear parameters within which a transfer to mutual ownership could be made, but they do not oblige such a transfer to be made. That is because developing the appropriate model for a mutual Post Office must not come from the top down.

Amendments 21A and 22ZD seek to ensure that Post Office Ltd is on a secure financial footing before any move to a mutual model may be made. The network must of course be on a secure financial footing before any move to a mutual model is made. Indeed, it would not be in the interest of any Post Office Ltd stakeholders to take on the running of a company that was not in a suitable position to sustain itself. Nor indeed would the Government consider handing over control of the Post Office if they were not satisfied that the company could flourish in the absence of the levels of subsidy that are currently provided.

The £1.34 billion in funding that we are providing to the network over the next few years will do more than just guarantee that at least 11,500 post offices will remain working. It will ensure that the network

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can be modernised, offer an improved customer experience and so be in a better position to compete for new business. We believe that the Post Office could be in a financial position that would allow for the possibility of mutualisation by the end of this Parliament. I hope that goes some way to answering the question put by the noble Baroness, Lady Donaghy. This funding will ensure that the Post Office services across the United Kingdom on which so many people rely, particularly the most vulnerable in our communities, are protected exactly as the noble Lord, Lord Cameron, so eloquently explained is needed.

Whether or not this move to a mutual structure happens, we envisage that the Government would still need to provide a small amount of subsidy to ensure that offices remain open where they might not otherwise survive, such as in rural or deprived urban areas; yet Amendment 21A would not permit a mutual to operate in these circumstances.

However, it is important that there is transparency about improvement in the financial position of the Post Office, as, for example, the noble Lord, Lord Whitty, seeks under his amendment. That is why this Bill introduces, at paragraph 17 of Schedule 12, a new requirement that the annual accounts of the Post Office be laid before Parliament every year.

We aspire to a vibrant and flourishing Post Office in the future, which does not simply rely on government handouts, but which can provide a wide range of services across a nationwide network. The markets in which the Post Office operates are highly competitive. It would not be in the interests of the Post Office, the future members of the mutual or the Government if the business plan being relied on to continue fostering that vibrant and flourishing Post Office were published, as envisaged by Amendment 22ZD.

I turn to Amendments 21C, 22ZA, 22ZB and 22ZC. These amendments all seek to require a further parliamentary approval process prior to any transfer of the Secretary of State's interest in the Post Office to a relevant mutual. Amendments 21C and 22ZB do this as stand-alone amendments, while Amendments 22ZA and 22ZC combine to the same effect.

Clause 5 introduces an important means by which Parliament can hold the Secretary of State to account for a decision to move towards a mutual ownership model for the Post Office. However, we do not believe it would be appropriate for Parliament to have a veto right over any subsequent move to mutual ownership that is within the statutory parameters being debated today. The reason is that developing the appropriate model for a mutual Post Office must not come from the top down. I am grateful to the noble Lord, Lord Borrie, for his observations. He may be interested to know that, subject of course to the strict statutory parameters set out in Clause 7, the interests of all of the Post Office's stakeholders-for example, sub-postmasters, staff, business partners and customers-must come first.

Co-operatives UK, the national trade body for co-operatives, is talking to those stakeholders and will shortly report to Ministers on some potential options for a mutually owned Post Office, and before any final decision is taken by the Secretary of State, there would

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of course also be a public consultation. But since, at the conclusion of that process, the ultimate decision to transfer the Post Office to a relevant mutual will rest with the Secretary of State, Parliament must be informed swiftly and in appropriate detail of the decision. Clause 5 sets out those requirements. It specifies the details that must be included in the report and also requires the Secretary of State to lay it before Parliament as soon as reasonably practicable after he has made the relevant direction or authorisation.

6 pm

I should like to set out in a little detail what is meant by "as soon as reasonably practicable", which I hope will address the concern of the noble Lord, Lord Kennedy. The Government's position is that it would not be acceptable for a report to be laid before Parliament as late as two years after the Secretary of State has made the relevant direction or approval, as Amendment 22 envisages. It is important that there is sufficient flexibility in the legislation to provide time for the report to be compiled or to deal with parliamentary recess timings, but the Government envisage that "as soon as reasonably practicable" would certainly be no more than a few weeks after the Secretary of State's direction or approval. We would expect it to be perfectly possible in practice for a report to be laid on the same day as the direction or approval is made.